Final Report of the Project „Evaluation and development of

Environmental Research

of the Federal Ministry for the Environment,

Nature Conservation, Building and Nuclear Safety

Project No. 3714 41 503 0

UBA-FB-00

Final Report of the Project „Evaluation and development of recommenda-tions on the CDM EB’s Sustainable Development tool including the sustainability requirements of other flexible mechanisms“

by

Christof Arens, Christiane Beuermann, Florian Mersmann, Frederic Rudolph

Wuppertal Institute for Climate, Environment, and Energy, Wuppertal1

Karen Holm Olsen, Jørgen Fenhann, Miriam Hinostroza, Fatemeh Bakhtiari

UNEP DTU Partnership, Copenhagen

1Wuppertal Institute for Climate, Environment and Energy

Doeppersberg 19, 42103 Wuppertal

2UNEP DTU Partnership

UN City – Marmorvej 51, 2100 Copenhagen Ø

On Behalf of the Federal Environment Agency

May 2015

Berichtskennblatt

Berichtsnummer UBA-FB 00

Titel des Berichts Endbericht des Ufoplanvorhabens „Bewertung und Entwicklung von

Vorschlägen zu dem -

flexibler Mechanismen“

Autoren Christof Arens, Christiane Beuermann, Florian Mersmann, Frederic

Rudolph1

Karen Holm Olsen, Jørgen Fenhann, Miriam Hinostroza, Fatemeh

Bakhtiari2

Durchführende Institutionen

1Wuppertal Institut für Klima, Umwelt, Energie

Döppersberg 19

42103 Wuppertal


UN City – Marmorvej 51

2100 Copenhagen Ø

Fördernde Institution Umweltbundesamt

Postfach 14 06

06813 Dessau-Roßlau

Abschlussjahr 2015

Forschungskennzahl (FKZ) FKZ 3714 41 503 0

Seitenzahl des Berichts 105

Zusätzliche Angaben

Schlagwörter Klimaschutz, Kyoto Protokoll, flexible Mechanismen, CDM, nachhal-

tige Entwicklung, SD Tool

Report Cover Sheet

Report No. UBA-FB 00

Report Title Final Report of the project „Evaluation and development of recom-

mendations on the CDM EB‖s Sustainable Development tool including

the sustainability requirements of other flexible mechanisms“

Author(s)

(Family Name, First Name)

Christof Arens, Christiane Beuermann, Florian Mersmann, Frederic

Rudolph1

Karen Holm Olsen, Jørgen Fenhann, Miriam Hinostroza, Fatemeh

Bakhtiari2

Performing Organization

(Name, Address)

1Wuppertal Institut für Klima, Umwelt, Energie

Döppersberg 19

42103 Wuppertal


UN City – Marmorvej 51

2100 Copenhagen Ø

Funding Agency The Federal Environment Agency

Postfach 14 06

06813 Dessau-Roßlau

Report Date (Year) 2015

Project No. (FKZ) FKZ 3714 41 503 0

No. of Pages 105

Supplementary Notes

Keywords climate change, Kyoto Protocol, flexible mechanisms, CDM, metho-

dologies, Sustainable Development, SD Tool

Evaluation and development of recommendations on further developing CDM EB‖s Sustainable Development tool

4

Kurzbeschreibung

Das Forschungsvorhaben ”Evaluation and development of recommendations on the CDM EB’s Sus-

tainable Development Tool including the sustainability requirements of other flexible mechanisms‛

hat zum Ziel, mögliche Unzulänglichkeiten des CDM SD Tools zu identifizieren, und strukturierte

Vorschläge zu seiner Verbesserung zu machen. Erkenntnisse aus diesem Projekt sollen Leuchtturm-

charakter für die Entwicklung von Nachhaltigkeits-Bewertungsinstrumenten in anderen Kohlenstoff-

Mechanismen inner- und außerhalb der UNFCCC besitzen.

Dieser Bericht spiegelt die konsolidierten Erkenntnisse aus den drei Arbeitspaketen des Vorhabens

wider. Das erste Kapitel erläutert den Hintergrund und leitet in den Bericht ein. Das darauf folgende

Kapitel bewertet und vergleicht Vorgaben zur Nachhaltigkeitsbewertung verschiedener Flexibler Me-

chanismen und multilateraler Standards.

Das dritte Kapitel beinhaltet einen Literatur-Überblick sowie Erkenntnisse aus Interviews zur Nutz-

barkeit des SD Tools mit Regierungsvertretern aus Gastgeberländern, Projektentwicklern sowie einer

Käuferperspektive. Im vierten Kapitel werden die gewonnenen Erkenntnisse über die Vor- und Nach-

teile des SD Tools im Vergleich zu anderen Mechanismen, vor allem aber in Anbetracht der

Bedürfnisse seiner Nutzer diskutiert. Diese Analyse dient dazu, Empfehlungen für die Weiterentwick-

lung des Tools zu geben. Die Vorschläge sind aufgeteilt in solche, die relativ leicht zu implementieren

sind, und solche, die das Tool zu einem echten Instrument zur Bewertung von Nachhaltigkeitseffek-

ten transformieren würden.

In einem letzten Schritt wird ein Ausblick auf Möglichkeiten gegeben, wie die Erfahrungen und Ver-

besserungsmöglichkeiten des Tools genutzt werden können auf dem Weg zu einem global harmoni-

sierten und dennoch flexiblen Instrument zur Bewertung von zur nachhaltigen Entwicklung beitra-

genden Treibhausgas-Minderungsmaßnahmen.

Abstract

The research project ”Evaluation and development of recommendations on the CDM EB’s Sustainable

Development tool including the sustainability requirements of other flexible mechanisms‛ seeks to

identify the CDM SD tool's possible shortcomings, and to make structured recommendations on how

to improve the EB's SD tool. Findings from this project are meant to have a lighthouse effect on the

development of provisions on Sustainable Development within other carbon mechanisms of the

UNFCCC and beyond.

This report represents the consolidated findings of three work packages within this research project.

The first chapter provides some background on the subject at hand, and leads into the report. The

following chapter covers the assessment and comparison of the SD provisions of selected flexible

mechanisms and multilateral standards.

The third chapter consists of a literature review and interviews with selected host country govern-

ments, project developers and a buyer perspective on the usability of the EB’s SD tool. In the fourth

chapter, we discuss pros and cons of the EB’s SD tool in comparison to other mechanisms and needs

voiced by practitioners. This analysis serves to arrive at structured recommendations for further de-

veloping the SD tool, divided into more easily implementable amendments, and those that would

transform the SD tool into a sound assessment tool for SD effects.

As a final step, we provide an outlook on possibilities to feed in experiences and recommendations to

further develop the tool on the way to a globally harmonized, flexible assessment of mitigation ac-

tions for Sustainable Development.


5

Table of Contents

List of Abbreviations .................................................................................................................. 9

Zusammenfassung .................................................................................................................. 12

Summary ................................................................................................................................ 17

1 Introduction .................................................................................................................... 22

2 What is offered? .............................................................................................................. 24

2.1 Methodology ..................................................................................................... 24

2.1.1 Literature review and assessment framework: Selection of standards and

policy frameworks for review .......................................................................... 24

2.1.2 Assessing the EB‖s SD tool against the state of the art in other

mechanisms ................................................................................................. 25

2.1.2.1 Identification of related indirect effects and their assessment via

monitoring, verification and evaluation 25

2.1.2.2 Consideration of stakeholder concerns within and beyond the direct

spatial and topical boundaries of the activity 26

2.1.2.3 Compilation 27

2.1.2.4 Synthesis 31

2.2 Analyzing SD Provisions of Selected Flexible Mechanisms and Multilateral

Institutions ....................................................................................................... 31

2.2.1 Short profiles of the mechanisms assessed ..................................................... 31

2.2.1.1 CDM SD tool 31

2.2.1.2 CDM Gold Standard 32

2.2.1.3 Crown Standard 33

2.2.1.4 Social Carbon Methodology 33

2.2.1.5 CCB Standards 34

2.2.1.6 UN REDD 34

2.2.1.7 UNDP NAMA SD tool 35

2.2.1.8 ADB Safeguard Policy 35

2.2.1.9 IFC Sustainability Framework 36

2.2.2 Comparison and Analysis ............................................................................... 37

2.2.2.1 Scope 37

2.2.2.2 Assessment types 39

2.2.2.3 Review and Evaluation 43

2.2.2.4 Stakeholder consultation 45

2.3 Summary .......................................................................................................... 49

3 What is needed? ............................................................................................................. 52


6

3.1 Methodology ..................................................................................................... 52

3.1.1 Literature review and survey of experiences with use of the EB‖s SD tool ............ 52

3.1.2 Analysis of the literature and interviews to assess usability of the EB‖s SD

tool for host country DNAs and other users...................................................... 56

3.2 Synopsis of literature review of DNA practices for SD assessment of CDM

projects ............................................................................................................ 56

3.2.1 State of knowledge on the CDM‖s contribution to SD ........................................ 57

3.2.2 Governance of the CDM‖s contribution to SD .................................................... 58

3.2.2.1 Host country DNA practices for approval of CDM projects 58

3.2.2.2 The role of the market and global rules 60

3.2.3 Evaluation of the EB‖s SD tool ......................................................................... 61

3.3 Interview perspectives, analysis and comparison of the needs and difficulties

to use the EB‖s SD tool ....................................................................................... 62

3.3.1 Overview of interviews ................................................................................... 62

3.3.2 Comparison of host country and user experiences with SD appraisal ................. 68

3.3.2.1 Host country DNA experiences 68

3.3.2.2 Project developer and buyer experiences 69

3.3.3 Concrete experience with use of the EB‖s SD tool ............................................. 70

3.3.3.1 Host country DNA experiences 70

3.3.3.2 Project developer and buyer experiences 70

3.3.4 How SD tool experience can be relevant beyond CDM ....................................... 70

3.3.4.1 Host country DNA perspectives 70

3.3.4.2 Project developer and buyer perspectives 71

3.4 Summary .......................................................................................................... 72

3.4.1 Experience with host country SD assessment and use of the EB SD tool ............. 72

4 Synthesizing needs and offers ......................................................................................... 74

4.1 Methodology ..................................................................................................... 74

4.1.1 Synthesis of chapters 2 and 3 ......................................................................... 74

4.1.2 Recommendations and feasibility of improvements .......................................... 75

4.2 Synthesis of the pros and cons of the EB CDM SD tool .......................................... 76

4.2.1 Matrix comparing the ―needs‖ for CDM sustainability assessment against

―offers‖ by different flexible mechanisms ......................................................... 77

4.2.2 Analysis of the matrix to identify shortcomings of the CDM SD tool ................... 78

4.3 Recommendations and feasibility analysis to further develop the CDM SD tool ...... 80

4.3.1 Level 1 Recommendations: Improving the tool ................................................. 81

4.3.2 Level 2 Recommendations: Enhancing the CDM SD tool .................................... 83


7

4.3.3 Summary ...................................................................................................... 85

5 Outlook: Towards an internationally harmonized SD assessment ....................................... 86

5.1 Sustainable Development impact assessment in emerging instruments ................ 86

5.2 Relevance for other mitigation mechanisms ........................................................ 87

5.3 Lessons for future developments in SD assessment ............................................. 87

References .............................................................................................................................. 91

6 Annex 1: Interview guide ................................................................................................. 96

7 Annex 2: Overview of literature reviewed .......................................................................... 98


8

List of Tables

Table 1: Assessment category 'Overarching set up of the standard' ................................. 28

Table 2: Assessment category 'assessment of sustainability impacts' ............................. 29

Table 3: Assessment category 'Stakeholder Consultations' ............................................. 30

Table 4: Overview of scope of analyzed approaches ....................................................... 38

Table 5: Overview of assessment types ......................................................................... 41

Table 6: Overview of monitoring requirements ............................................................... 44

Table 7: Overview of stakeholder requirements .............................................................. 47

Table 8: Countries selected for the survey ..................................................................... 54

Table 9: Overview of interviews regarding usability of the EB SD tool ............................... 63

Table 10: Structure of the comparative matrix .................................................................. 75

Table 11: Comparative matrix of needs and offers ............................................................ 77

Table 12: Summary of recommendations ......................................................................... 85

Table 13: Flexible SD Framework for NAMAs .................................................................... 88


9

List of Abbreviations

ADB Asian Development Bank

BUR Biennial Update Report

CCB Climate, Community and Biodiversity

CCBA Climate, Community & Biodiversity Alliance

CDM Clean Development Mechanism

CER Certified Emission Reduction

CMP Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol

CO2 Carbon Dioxide

COP UN Climate Change Conference / Conference of the Parties

DEHSt German Emissions Trading Authority

DNA Designated National Authorities

DNV GL DOE, merged from Det Norske Veritas und Germanischer Lloyd

DOE Designated Operational Entity

DTU Technical University of Denmark

EB Executive Board

EIA Environmental Impact Assessment

ETS Emission Trading Scheme

EU European Union

FAO Food and Agriculture Organization of the United Nations

FCPF Forest Carbon Partnership Facility

FPIC Free Prior Informed Consent

FVA Framework for Various Approaches

GCF Green Climate Fund

GEF Global Environment Facility

GHG Greenhouse Gas

GS Gold Standard

HFC-23 Hydrofluorocarbon 23

HR Human Rights

HRIA Human Rights-based Impact Assessment

IFC International Finance Corporation

INDC Intended Nationally Determined Contribution

ISO International Organization for Standardization

LCDS Low Carbon Development Strategy

LDC Least Developed Country


10

LoA Letter of Approval

LS Local Stakeholders

LSC Local Stakeholder Consultations

M&P Modalities and Procedures

MCA Multi Criteria Analysis

MDB Multilateral Development Bank

MRV Measurable, reportable and verifiable

N2O Nitrous oxide

NAMA Nationally Appropriate Mitigation Action

NGO Non-Governmental Organization

NMM New Market Mechanism

OECD Organisation for Economic Development

PDD Project Design Document

PoA Programmes of Activities

PP Project Participant

PS Performance Standards

QA/QC Quality Assurance / Quality Control

RBM Results-based Management

REDD+ Reducing Emissions from Deforestation and Forest Degradation and the role of con-

versation, sustainable management of forests and enhancement of forest carbon

stocks in developing countries

SCM Social Carbon Methodology

SCR Social Carbon Report

SD Sustainable Development

SDC Sustainable Development Co-benefit

SDG Sustainable Development Goal

SEPC Social and Environmental Principles and Criteria

SPS Safeguard Policy Statement

SSN SouthSouthNorth

TAC Technical Advisory Committee

TGO Thailand Greenhouse Gas Management Organisation

UBA Federal Environment Agency

UN REDD The United Nations Collaborative Programme on Reducing Emissions from Defore-

station and Forest Degradation in Developing Countries

UNCSD United Nations Conference on Sustainable Development

UNDP United Nations Development Programme


11

UNEP United Nations Environment Programme

UNFCCC United Nations Framework Convention on Climate Change

US United States

VCS Verified Carbon Standard

WP Work Package

WWF World Wide Fund For Nature


12

Zusammenfassung

Einführung

Das Forschungsvorhaben ”Evaluation and development of recommendations on the CDM EB’s Sus-

tainable Development Tool including the sustainability requirements of other flexible mechanisms‛

hat zum Ziel, mögliche Defizite des CDM SD Tools zu identifizieren und strukturierte Vorschläge zu

seiner Verbesserung zu machen. Erkenntnisse aus diesem Projekt sollen für die Entwicklung von

Nachhaltigkeits-Bewertungsinstrumenten in anderen Kohlenstoff-Mechanismen inner- und außer-

halb der UNFCCC nutzbar sein.

Dieser Bericht gibt die konsolidierten Erkenntnisse aus den drei Arbeitspaketen des Vorhabens wie-

der und folgt dabei deren Struktur: Das erste Kapitel erläutert den Hintergrund und leitet in den Be-

richt ein. Das darauf folgende zweite Kapitel ('What is offered?') bewertet und vergleicht Vorgaben

zur Nachhaltigkeitsbewertung verschiedener Flexibler Mechanismen und multilateraler Standards.

Das dritte Kapitel ('What is needed?') beinhaltet einen Literatur-Überblick sowie Erkenntnisse aus

Interviews zur Nutzbarkeit des SD Tools mit Regierungsvertretern aus Gastgeberländern, Projektent-

wicklern sowie einer Käuferperspektive. Im vierten Kapitel werden die gewonnenen Erkenntnisse

über die Vor- und Nachteile des SD Tools im Vergleich zu anderen Mechanismen, vor allem aber in

Anbetracht der Bedürfnisse seiner Nutzer diskutiert. Diese Analyse dient dazu, Empfehlungen für die

Weiterentwicklung des Tools zu entwickeln. Die Vorschläge sind aufgeteilt in solche, die relativ leicht

zu implementieren sind, und solche, die das Tool zu einem echten Instrument zur Bewertung von

Nachhaltigkeitseffekten transformieren würden.

In einem letzten Schritt wird ein Ausblick auf Möglichkeiten gegeben, wie die Erfahrungen und Ver-

besserungsmöglichkeiten des Tools genutzt werden können auf dem Weg zu einem global harmoni-

sierten und dennoch flexiblen Instrument zur Bewertung von zur nachhaltigen Entwicklung beitra-

genden Treibhausgas-Minderungsmaßnahmen.

Wie ist das Angebot?

Ziel des Kapitels 'What is offered?' ist es zu bewerten, wie angemessen und umfassend das derzeitige

SD Tool ist im Vergleich zu internationalen Standards der Nachhaltigkeitsbewertung. Die "Angebote"

('offers') von vier Zertifizierungs-Standards, zwei Mechanismen aus dem weiteren UNFCCC-Kontext

und zwei Safeguard-Politiken multilateraler Entwicklungsbanken werden mit dem derzeitigen Stand

des CDM SD Tools verglichen, um Stärken und Schwächen des Instruments zu identifizieren.

Die meisten analysierten Mechanismen verwenden integrierte Methoden für die Bewertung von

nachhaltiger Entwicklung. Sie schreiben ex-ante Bewertungen sowohl positiver als auch negativer

Wirkungen der jeweiligen Interventionen vor. Safeguard- und Risiko-Bewertungen werden verwen-

det, z.T. beides. All diese Systeme sind verpflichtend für die Projektentwickler. Ein weiterer wichtiger

Aspekt dieser Systeme ist, dass sie im Verlauf der Aktivitäten die anfangs identifizierten positiven

oder negativen Effekte auf nachhaltige Entwicklung durch Monitoring-Systeme nachverfolgen. Und

nicht zuletzt werden von allen Mechanismen Verfahren zur Interaktion mit Stakeholdern angewandt,

damit von Projekten Betroffene ihre Bedenken äußern und im Zweifelsfall Gegenmaßnahmen ergrif-

fen werden können. Hierbei ist ein institutionaliserter Beschwerdemechanismus ebenfalls hilfreich.

Im Vergleich dazu nutzt das SD Tool nicht alle Möglichkeiten, die ein integrierter Ansatz bieten wür-

de. Das Tool bewertet strukturiert positive Wirkungen auf nachhaltige Entwicklung, jedoch werden

Angaben weder kontrolliert noch verifiziert. Negative Wirkungen, oder mögliche Risiken, werden

nicht bewertet. Trotz der Vorgaben des Gesamt-CDM zu lokalen und globalen Stakeholder-Prozessen

gibt es keine spezifische Vorgaben im Kontext nachhaltiger Entwicklung - auch das Tool greift dies


13

nicht auf. Nicht zuletzt ist das Tool rein freiwillig und kann nur von Projektentwicklern und PoA-

Koordinatoren genutzt werden. Diese Defizite machen das Tool im Wesentlichen zu einem - dank

fehlendem Monitoring wenig verlässlichen - Marketing-Instrument.

Dies ist umso bedauerlicher, als die Einführung von Teilen, oder auch aller oben genannten Kompo-

nenten die Kritik am CDM als Ganzem wesentlich mindern könnte. So werden z.B. einige CDM-

Projekte wegen negativer Wirkungen auf die lokale Bevölkerung kritisiert. Eine eingehende Risiko-

analyse im Verbund mit entsprechenden Stakeholder-Dialogen könnte helfen dies zu mindern, die

Projektergebnisse zu verbessern, und zu einer größeren Akzeptanz von CDM-Projekten im Allgemei-

nen beizutragen.

Das Tool würde zudem stark von einer Einführung von Monitoring und Verifizierung profitieren.

Nicht nur würde dies dem Instrument selbst, sondern auch dem CDM als Ganzem zugute kommen.

Tatsächlich haben einige DNAS, so etwa Nepal und die Philippinen, bereits Maßnahmen eingeführt,

um in den PDDs gemachte Angaben zu Nachhaltigkeits-Beiträgen von Projekten zu kontrollieren und

bewerten zu können.

Die Beauftragung externer Prüfer zur Verifizierung von Nachhaltigkeitseffekten kann ergänzend be-

fürwortet werden - dies würde die Glaubhaftigkeit der Überprüfung und Evaluierung stark erhöhen.

Die Einführung von einigen oder allen diesen Elementen muss nicht zu einer Überlastung der Pro-

jektentwickler mit inakzeptabel hohen Kosten führen. Studien haben nachgewiesen, dass Projekt-

entwickler die für den Gold Standard notwendigen Bewertungsschritte als machbar einstufen, und

dass sie mit überschaubarem Aufwand zu bewältigen sind.

Was wird nachgefragt?

Das Kapitel 'What is needed' nimmt den Status Quo des SD Tools zur Grundlage für eine Übersicht

der vorhandenen Literatur und für Interviews mit Regierungsvertretern ausgewählter Gastgeberlän-

der, Projektentwickler und einem Käufer von Emissionszertifikaten. Ziel ist es zu erfassen, wie An-

wender die Nutzbarkeit des Tools einschätzen, ihre Anregungen zur weiteren Verbesserung des Tools

einzuholen, und zu eruieren, wie das Tool zu Diskussionen zur Bewertung von nachhaltiger Entwick-

lung über den CDM hinaus beitragen kann. Das Kapitel versucht also, die Bedürfnisse ('needs') der

Nutzer des Tools im Vergleich zu seinen derzeitigen Leistungen zu kondensieren.

Das SD Tool ist nicht direkt für DNAs nützlich, da es zur Anwendung durch Projektdurchführer ange-

legt ist. Die DNA Chinas ist die einzige der interviewten DNAs, in deren Regulierungsbereich Projekt-

entwickler das Tool bereits verwendet haben - allerdings ohne Austausch zwischen PPs und DNA.

Uganda und Kambodscha, zwei mittlere bzw. kleine Länder sehen verschiedene Optionen, die Nut-

zung des Tools auszuweiten, um auf nationaler Ebene die Kapazitäten für die Bewertung nachhalti-

ger Entwicklung zu stärken. So könnte z.B der mit dem Tool erstellte Bericht als Basis für lokale Sta-

keholder-Konsultationen verwendet werden, oder das Tool könnte zur Verpflichtung für PPs werden,

um einen Letter of Approval zu erhalten. China und Brasilien, zwei große Länder, sehen keine direkte

Rolle für das Tool für die nationale Erhebung von Nachhaltigkeitseffekten oder Zustimmung zu Pro-

jektvorhaben.

Der Checklisten-Ansatz des Tools ist vergleichbar zu gängiger Praxis vieler Länder (z.B. Uganda,

Kambodscha oder Brasilien). Checklisten-Ansätze kategorisieren Co-Benefits in drei oder vier Dimen-

sionen nachhaltiger Entwicklung: ökonomisch/technologisch, sozial, und ökologisch. Mit seiner Ta-

xonomie nachhaltiger Entwicklung in drei Dimensionen, zwölf Kriterien und 70 Indikatoren als Me-

nü zur Strukturierung von Berichten über die erwarteten Nachhaltigkeitseffekte von Projekten ver-

meidet das Tool eine internationale Definition von nachhaltiger Entwicklung, vereinfacht jedoch

einen strukturierten Vergleich, der das Vorrecht von Staaten zur ENtscheidung nationaler Prioritäten

respektiert.


14

DNAs betreiben im Allgemeinen kein systematisches Monitoring und Verifizierung von Angaben zu

nachhaltiger Entwicklung; allerdings haben Uganda und Brasilien Erfahrungen mit Beschwerden

lokaler Gemeinschaften über die Implementation von Projekten. In einem Fall hat Brasilien die Ge-

nehmigung eines Projektes zurück gezogen. Allerdings bestehen hierzu keine etablierten Verfahren.

Aus den Interviews und der Literatur zu DNA-Erfahrungen lässt sich ein klares Interesse zur Nach-

vollziehung von Nachhaltigkeitsangaben ableiten, wobei einige DNAs den Projektentwicklern keinen

zusätzlichen Aufwand aufbürden wollen (z.B. China), oder besorgt sind über den zusätzlichen Auf-

wand (z.B. Kambodscha). In der concept note 'Voluntary monitoring of sustainable development co-

benefits’, die auf der 82. Sitzung des CDM Executive Board diskutiert wurde, werden neue Möglich-

keiten zur Nutzung des Tools als Basis für standardisiertes Monitoring, Validierung und Verifizierung

von Nachhaltigkeitsangaben zur Unterstützung vorhandener Praktiken von DNAs erörtert.

In seiner ursprünglich vorgeschlagenen Form enthielt das SD Tool Safeguards zur Vermeidung nega-

tiver Nachhaltigkeitseffekte, die jedoch aus seiner heutigen Fassung gestrichen wurden. Das Tool

besitzt daher auch keine Vorgaben zur Einhaltung von Menschenrechten. Uganda wünscht sich zu-

sätzliche UNFCCC Vorgaben hierzu und Kambodscha hat technische Unterstützung durch das

UNFCCC-Sekretariat angefordert, um landesspezifische Anforderungen zum Monitoring von Nachhal-

tigkeitseffekten und Stakeholder-Konsultationen zu entwickeln. China und Brasilien verweisen auf

nationale Institutionen, die hiermit befasst sind, und sehen daher kein Interesse an zusätzlicher Un-

terstützung von internationaler Seite.

Alle befragten Nutzer des Tools sehen das Tool als ein sehr hilfreiches und einfaches Instrument zur

standardisierten, qualitativen Erfassung von Beiträgen zur nachhaltigen Entwicklung. Allerdings

werden auch einige Schwächen hervorgehoben, besonders die fehlende Erfassung negativer Effekte,

und das Fehlen einer Möglichkeit, die Erfassung positiver Beiträge für das Erzielen höherer Erlöse für

generierte Emissionszertifikate zu nutzen. Weiter wurden das Fehlen von Safeguards, Vorgaben für

Stakeholderkonsultationen, Monitoring, Validierung und Verifizierung ebenso wie der rein qualitati-

ve Charakter des SD Tools bemängelt.

Der Vergleich der Bedürfnisse von Anwendern mit gängiger Praxis von DNAs bei der Erfassung von

Nachhaltigkeiteffekten ergibt, dass die nationalen Standards nicht ausreichen, um die Erwartungen

des Premium-Marktes zu befriedigen. Bekannte Probleme bei der Setzung hoher Nachhaltigkeits-

standards in Ländern, bekannt als 'Abwärtsspirale' bei der Setzung im niedrigerer Standards, um

Investoren anzulocken, bestehen weiter. Nachhaltigkeit ist im allgemeinen Kohlenstoffmarkt nicht

bepreist, die freiwilligen Zertifizierungsinstrumente sind die Ausnahme. Weiterhin unterscheiden

sich die Kapazitäten und Prioritäten der Gastgeberländer stark. Die Rolle der DNAs bei der Überwa-

chung des Beitrags zu nachhaltiger Entwicklung durch den CDM ist auf internationaler Ebene nur

äußerst schwach definiert - eine Reihe von Vorschlägen zur Stärkung der Rolle von DNAs wird derzeit

im Zuge der Überprüfung der CDM modalities and procedures diskutiert. Aufgrund der derzeitigen

Schwächen innerhalb des CDM haben ein Projektentwickler und eine Zertifikate kaufende Regierung

jeweils eigene Prozesse und Standards entwickelt: einen Entwurf für den sog. ‘Global Carbon Deve-

lopment Benefits Standard’ zur Quantifizierung von Entwicklungs-Vorteilen, und Safeguards gegen

negative Auswirkungen auf Basis des ursprünglichen Entwurfs des SD Tools. Obgleich das Tool im

Kohlenstoffmarkt begrüßt wird, sind sich die Projektentwickler uneins, ob die Nutzung des Tools

verpflichtend sein sollte. Während einige argumentieren, dass dies die Glaubwürdigkeit des CDM als

Ganzem erhöhen würde, befinden andere, dass nicht alle Projekte die Nutztung des Tools erfordern,

und eine verpflichtende Nutzung die Entwicklungskosten erhöhen würde.


15

Synthese der Angebote und Nachfragen

In dem Kapitel 'Synthesizing needs and offers' werden die Ergebnisse der vorherigen Kapitel synthe-

tisiert. Vor- und Nachteile des SD Tools werden diskutiert und und mit den anderen Instrumenten

und den Bedürfnissen der Nutzer verglichen. Auf Basis dieser Perspektiven entstand eine verglei-

chende Matrix (S. 77).

Von der Matrix werden Empfehlungen für die Weiterentwicklung des Tools abgeleitet. Dazu werden

zwei aufeinander aufbauende Ebenen eingeführt:

Ebene Eins stellt Verbesserungen dar, die wir als realtiv einfach umzusetzende Ergänzungen anse-

hen.

Empfehlungen der Ebene Zwei gehen einen Schritt weiter: Sie beschreiben grundsätzlichere Ände-

rungen, die das freiwillige Tool zu einem ernstzunehmendes Bewertungs- und Berichts-Instrument

aufwerten würden.

Ebene Eins: Verbesserung des Tools

Einführung von no-harm safeguards

Dies bedeutet die Erkennung möglicher negativer Auswirkungen von CDM-Projekten durch

die Implementierung von 'no harm' Safeguards als verpflichtende Maßstäbe. Solche Safe-

guards könnten bspw. von den MDGs abgeleitet werden und Menschenrechte, Arbeits-

standrds, Anti-Korruptions-Maßnahmen und ähnliches beinhalten.

Entwicklung von Monitoring- und Berichts-Richtlinien

Seit EB82 ist Monitoring und Berichten über Nachhaltigkeitseffekte optional möglich. Hierfür

können globale Richtlinien zur freiwilligen Nutzung mit dem SD Tool zur Verfügung gestellt

und fortentwickelt werden. SD Monitoringberichte sollten unabhängig vom Treibhausgas-

Monitoring erstellt werden, um dem freiwilligen und flexiblen Charakter des Tools Rechnung

zu tragen.

Einführung von unabhängiger Validierung und Verifizierung von Nachhaltigkeits-Angaben

Unabhängige Validierung und Verifizierung von positiven Nachhaltigkeitseffekten erhöht

maßgeblich die Glaubwürdigkeit der SDC-Berichte. Aus dem gleichen Grund wie oben sollte

diese Maßnahme unabhängig von der regulären Validierung und Verifizierung von Treib-

hausgas-Minderungen erfolgen.

Verstärkung der Interaktions-Verpflichtungen mit Stakeholdern

SDC-Berichte könnte als Grundlage für Stakeholder-Konsultationen verwendet werden. Die

zusätzliche Einführung eines Beschwerde-Instrumentes für CDM-Projekte, um mögliche nega-

tive Effekte von Projekten/Programmen zu verfolgen, sollte dabei mit integriert werden.

Ebene Zwei: Aufwertung des Tools

Einführung von UNFCCC-Zertifizierung von Nachhaltigkeits-Beiträgen

Es besteht Interesse an nationaler Zertifizierung für positive Beiträge zur nachhaltigen Ent-

wicklung, wie der thailändische Crown Standard beweist. Ein UNFCCC-weiter Rahmen für die

Zertifizierung von Nachhaltigkeit könnte Ländern zur Verfügung gestellt werden, die keine

Kapazität zur Entwicklung eigener Standards besitzen.

Schöpfung eines globalen Standards zur Quantifizierung von Nachhaltigkeits-Beiträgen

Die Einführung eines Wertes für Beiträge zur nachhaltigen Entwicklung würde bedeuten,

dass der Wille, für besondere Leistungen zu zahlen identifiziert werden, und dadurch zusätz-


16

liche Finanzmittel eingeworben werden können. Hierzu wird ein dreistufiger Prozess vorge-

schlagen:

▸ Entwicklung eines globalen Genehmigungs-Standards für Quantifizierungsmethoden,

▸ Erlaubnis für Projektentwickler und undere Organisationen, Methoden für die

Quantifizierung von Nachhaltigkeits-Beiträgen zu entwickeln, und

▸ Vergabe des Genehmigungsprozesses an eine Institution wie das 'UNFCCC Methodolgies

Panel'.

Ausblick

Erfahrungen bei der Bewertung von Beiträgen zur nachhaltigen Entwicklung zeigen, dass das Tool

das Potential hat, das Berichtswesen zu Nachhaltigkeitsbemühungen in den Minderungsmecha-

nismen (NAMAs, NMM/FVA, REDD+, LCDS, INDCs) zu vereinheitlichen. Es wäre hilfreich und eine

echte Vereinfachung, auf vergleichbare Nachhaltigkeitsberichte in allen Ländern sowohl in- als auch

außerhalb des CDM, in Projekten, Programmen und strategischen Ansätzen für Klima und Ent-

wicklung zurückgreifen zu können.

Die hier ausgesprochenen Empfehlungen stellen einen schrittweisen Ansatz zu immer ambitionier-

teren und grundlegenderen Änderungendes SD Tools dar, die es attraktiver und universeller an-

wendbar machen können, und letztlich die Möglichkeit eines harmoniserten Berichtswesens zu

Nachhaltigkeitseffekten sowohl auf nationaler als auch internationaler Ebene bieten.

Eine grundlegende Voraussetzung zur Harmonisierung der verschiedenen Mechanismen ist die Mög-

lichkeit einer international vereinbarten Definition von Nachhaltigkeitskriterien sowie Indikatoren,

die eine einheitliche Bewertung von Nachhaltigkeitseffekten auf transparente, inklusive und objekti-

ve Art überhaupt erst ermöglicht, aber dennoch das Vorrecht der Staaten respektiert, ihre eigenen

nationalen Nachhaltigkeits-Prioritäten zu definieren. Dies wird von dem SD Tool bereits geboten.

Vorteile nachhaltiger Entwicklung in Klimaschutzinstrumenten sind von herausragender Bedeutung

für die Entwicklung von Entwicklungspfaden jenseits einer alleinigen Fokussierung auf Klimaschutz.

Minderungsmaßnahmen können zusätzliche gesundheitliche, soziale, ökologische, makroökonomi-

sche und Gerechtigkeitsaspekte zeitigen. Mit Blicka auf das für 2015 geplante Klimaabkommen ha-

ben viele Entwicklungsländer mit der Einführung oder Vertiefung von Klimapolitiken begonnen. Vor-

teile nachhaltiger Entwicklung in CDM und anderen Mechanismen können die Bedürfnisse von Ent-

wicklungsländern sowohl zu nachhaltiger Entwicklung als auch Klimaschutz miteinander verbinden.

Daher kommen Ansätze zur Vertiefung der Nachhaltigkeitsbewertung gerade jetzt zur rechten Zeit.


17

Summary

Introduction

The German Emissions Trading Authority (DEHSt) has tasked the Wuppertal Institute and UNEP DTU

Partnership (formerly UNEP Risoe Center) with conducting the research project ”Evaluation and de-

velopment of recommendations on the CDM EB’s sustainable development tool including the sus-

tainability requirements of other flexible mechanisms‛. Findings from this project are meant to have

a lighthouse effect on the development of provisions on Sustainable Development (SD) within other

carbon mechanisms of the UNFCCC and beyond.

The report is structured as follows:

After a short introduction to the topic, chapter 2 ('What is offered?') of this report covers the assess-

ment and comparison of the SD provisions of selected mechanisms and multilateral standards.

The third chapter ('What is needed?') consists of a literature review and interviews with selected host

country governments, project developers and a buyer perspective on the usability of the EB’s SD tool.

In the fourth chapter ('Synthesizing needs and offers'), we recall and synthesise findings of the previ-

ous two chapters. We discuss pros and cons of the EB’s SD tool in comparison to other mechanisms

(analysed in chapter 2) and ‛needs“ voiced by practitioners (determined in chapter 3). This analysis

serves to arrive at structured recommendations for further developing the SD tool, divided into more

easily implementable amendments, and those that would transform the SD tool into a sound assess-

ment system for SD effects.


further develop the tool on the way to a globally harmonised, flexible assessment of mitigation ac-


What is offered?

The aim of this chapter is to qualitatively assess the suitability and comprehensiveness of the current

SD tool against international level standards for sustainability assessment. We compare what is 'of-

fered' by four certification standards, two mechanisms within the larger UNFCCC context, and two

safeguard policies of Multilateral Development Banks, with the current state of the CDM SD tool, to

identify strengths and weaknesses of the tool against 'state of the art'.

Most mechanisms analysed apply an integrated approach to sustainable development assessment.

They require the ex-ante assessment of both positive and negative impacts of the respective interven-

tions. Alternatively, they make use of safeguard and / or risk assessment systems. All these systems

are mandatory for the respective project developers or client. Another important component of these

systems is that they subsequently follow-up upon the claims made in the initial SD assessment in that

they have monitoring systems in place. Some systems additionally require an obligatory verification

of the benefits claimed. Last not least, a vital part of an integrated approach to SD assessment is a

meaningful stakeholder interaction procedure, which enables people affected by interventions to

voice their concerns combined with the possiblity to embark on corrective actions. This is at best pai-

red with a grievance mechanism.

By way of contrast, the CDM SD tool does not make use of the full potential an integrated approach

offers. The tool does assess positive impacts in a structured manner. However, the claimed benefits

are neither monitored nor verified. Negative impacts or possible risks are not assessed. Despite the

global and local stakeholder procedures in the CDM in general, these do not cover SD aspects specifi-

cally, as they are not included in the CDM SD tool. Last not least, the tool is voluntary and can only be


18

used by project proponents and coordinating managing entities. These shortcomings make the tool

primarily a marketing instrument, albeit in the absence of monitoring procedures with questionable

reliability.

This is all the more regrettable because integrating all or some of the components mentioned above

could address criticism voiced against the CDM. For example, some CDM projects are being criticized

for causing negative impacts for the local population. A thorough risk assessment, combined with a

meaningful stakeholder interaction, would clearly help managing these claims, improve the project

results, and contribute to greater acceptance of CDM projects.

The pure declaratory nature of the SD tool could be overcome if SD effects claimed would be monito-

red and verified. Again, this measure would strengthen both the SD assessment itself and the credibi-

lity of the mechanism as a whole. In fact, some DNAs such as the Philippines and Nepal have already

introduced measures to follow-up on the SD claims made in the PDDs and assessed by the respective

DNAs.

The use of external auditors that verify the monitored effects can be highly recommended. This mea-

sure adds credibility to review and evaluation efforts. Making SD assessment mandatory would un-

derline the importance of the different elements, again adding credibility.

Adding some or all of these requirements does not necessarily result in burdening project proponents

with intolerable extra cost. Studies have shown for the additional steps of the Gold Standard assess-

ment that project proponents perceive them as manageable, and that they can be met with a reaso-

nable amount of additional work.

What is needed?

This chapter takes the SD tool's status quo as a basis for a literature review and interviews with se-

lected host country governments, project developers and a CER buyer. It seeks to assess how practi-

tioners perceive the usability of the EB’s SD tool, their views on what would be needed for further

improving the tool, and how the tool can feed into discussions on SD assessment beyond the CDM. In

short, the chapter seeks to condense the 'needs' of the tool's users in comparison to what it currently

offers.

The SD tool is not directly useful to DNAs, as it is meant for PPs to use. China is the only DNA of the

four approval bodies interviewed where project developers have used the tool, but with no dialogue

between PPs and the DNA. Uganda and Cambodia, two medium and small seized countries, see sev-

eral options to expand use of the tool to strengthen their capacity for SD assessment at national level,

e.g. by using the sustainable development report (SDC) from the tool as a basis for local stakeholder

consultations and by making the tool mandatory for PPs to use as a condition for issuance of the LoA.

China and Brazil, on the other hand, are two big countries with high institutional capacity and do not

see any direct role to play for the tool in relation to national SD assessment and approval.

In relation to host country DNA practices for SD appraisal and approval of CDM projects, the tool is

similar to the checklist approach of most countries (e.g. Uganda, Cambodia and Brazil), which cate-

gorise co-benefits into three (sometimes four) dimensions of Sustainable Development: eco-

nomic/technological, social and environmental. By providing a taxonomy of sustainable develop-

ment benefits with three dimensions, 12 criteria and 70 indicators as a menu for structuring report-

ing on expected SD impacts of projects, the tool does not give an international definition of what SD

means, but facilitates a structured comparison that respects Parties’ prerogative to decide on national

priorities.

Monitoring and verification of SD claims is not practised systematically by DNAs, though Brazil and

Uganda have experience with community complaints related to projects under implementation. In


19

one case Brazil has withdrawn the LoA, though there are no established procedures for how to do it

and what the implications should be. From the interviews and in the literature on DNA experiences

with SD assessment, there is a clear, emerging interest to follow-up that SD claims are met, though

some DNAs do not wish to add extra work and requirements to PPs (e.g. China) and are concerned

about the extra efforts required (e.g. Cambodia). With the concept note on ‘Voluntary monitoring of

sustainable development co-benefits’ discussed at the 82nd Executive Board meeting 16-20 February

2015, new opportunities are considered to use the tool as a basis for monitoring, validation and veri-

fication of SD claims in a standardized way that supports DNA practices.

Regarding safeguards against negative impacts of CDM projects, the draft SD tool had provisions for

safeguards; however, the current tool is silent on this and does not address e.g. issues of compliance

with human rights. Uganda would like to have more guidance in this respect and Cambodia has re-

quested technical assistance from the UNFCCC Secretariat to assist with country specific guidance for

monitoring of SD impacts and guidelines for local stakeholder consultations. China and Brazil refer to

national institutions that already deal with such issues and do not see an interest in additional sup-

port from the international level.

From the perspective of users of the SD tool, all interviewees find it very useful and simple as a stan-

dardized, qualitative approach to SD assessment. However, a number of weaknesses are identified for

the tool to meet user needs, particularly avoiding negative impacts and attracting a premium price for

carbon credits with high sustainable development benefits. The tool does not include safeguards to

mitigate risks of negative impacts, it does not include provisions for stakeholder consultations to en-

hance local SD benefits, it does not provide modalities for monitoring, validation and verification and

it only makes a qualitative, not a quantitative assessment of benefits.

Comparing user needs with host country DNA practices for SD assessment, national standards fall

short of meeting expectations in the premium market. Long-known problems of disincentives for

countries to set high SD standards, known as a ‘race-to-the-bottom’ for low SD requirements to better

attract investments, are still at play and sustainable development is not priced in the compliance

market, only through voluntary certification schemes. Furthermore, the capacities and priorities of

host countries differ widely and the role of DNAs in governing the CDM’s contribution to SD is not

described in any detail internationally, though a range of proposals to strengthen the role of DNAs is

under consideration as part of an ongoing review of CDM modalities and procedures. Against these

shortcomings, a project developer and government buyer have developed their own procedures and

standards, respectively a draft ‘Global Carbon Development Benefits Standard’ for quantification of

development benefits and due diligence safeguards against negative impacts based on the draft CDM

SD tool. Though the SD tool is welcomed in the carbon market, PPs are divided whether the tool

should be mandatory to use. Some argue it would add credibility to the mechanism as a whole and

others argue not all projects need it and it would add extra costs for project development.

Synthesizing needs and offers

In this chapter, we recall and synthesize findings of the previous chapters. We discuss pros and cons

of the EB’s SD tool in comparison to other mechanisms and 'needs' voiced by practitioners. Coming

from these two perspectives, we arrive at a comparative matrix (see page 77).

From this analysis we derive recommendations for further developing the SD tool.

This is done on two consecutive levels:

Level one lays out improvements that we regard as amendments to the SD tool, and therefore rela-

tively easy to install.


20

Level two recommendations go one step further: They describe more fundamental changes that

would help to enhance the voluntary tool into a credible assessment and reporting system.

Level one: Improving the tool

Introduce no-harm safeguards

This implies assessing possible negative impacts of CDM projects by establishing 'no harm'

safeguards as mandatory benchmarks. Such safeguards could be based, p.ex., on the MDGs

and comprise Human rights, good labour practice, anti corruption issues, and the like.

Develop monitoring and reporting guidelines

Since EB82, monitoring and reporting of SD impacts is optional. Global guidelines can be

made available and tailored for voluntary use with the SD tool. We propose to keep this moni-

toring separate from GHG reduction monitoring, so as to keep the SD tool voluntary and flexi-

ble to use.

Introduce 3rd Party validation and verification of SD claims

Independent validation and verification of SD co-benefits will greatly enhance the credibility

of the SDC reports. Again, keeping 3rd party validation and verification separate from valida-

tion and verification of GHG reductions will keep the tool voluntary and flexible.

Link enhanced stakeholder requirements to the CDM SD tool

SDC reports could be used as the basis for stakeholder consultations. The additional introduc-

tion of a grievance mechanism for CDM projects to address potential negative impacts of pro-

jects / programmes should complement this measure.

Level two: Enhancing the tool

Introduce UNFCCC certification of SD co-benefits

There is an interest in national certification for SD co-benefits, as can be seen in the Crown

Standard in Thailand. A UNFCCC SD certification framework could be made available to coun-

tries that do not have the capacity to develop their own standards.

Create a global standard for quantification of SD co-benefits

Establishing a value for the SD co-benefits means that the willingness to pay for extra benefits

can be identified and additional sources of finance for mitigation can be leveraged. We pro-

pose a three-step approach:

▸ Develop a global approval standard for quantification methodologies,

▸ Give project developers as well as other institutions the opportunity to develop methods

for SD co-benefits quantification compatible with their needs, and

▸ Assign an institution such as the 'UNFCCC Methodologies Panel' for the approval

procedure of the methods.

Outlook

SD assessment experiences by both host country DNAs and CDM project participants indicate that an

enhanced CDM SD tool could serve as a blueprint for harmonizing reporting on SD efforts across

mitigation mechanisms such as NAMAs, NMM/FVA, REDD+, LCDS and INDCs. It would be useful and

a simplification to have a uniform SD reporting format across countries for all CDM projects and be-

yond to actions and policies for mitigation and development incentivised by other mitigation mecha-

nisms.


21

Level 1 and level 2 recommendations introduce a step-by-step approach to increasingly ambitious

and more fundamental changes to the SD tool, which could make it attractive and more widely appli-

cable for SD assessment of mitigation actions beyond CDM to other climate mechanisms at national

and internationally levels such as domestic emissions trading schemes (ETS), New Market Mecha-

nisms (NMM), a Framework for Various Approaches (FVA), Nationally Appropriate Mitigation Actions

(NAMAs) and Green Climate Fund (GCF) financing for mitigation actions.

A key starting point for harmonization across mechanisms is the SD tool’s international definition of

SD criteria and indicators that enables a uniform SD assessment report in a transparent, inclusive

and objective manner across projects and countries, while maintaining the prerogative of Parties to

define their national SD priorities.

Sustainable Development benefits of climate instruments are highly relevant for development path-

ways beyond the area of climate change. Mitigation measures can have additonal health, social, envi-

ronmental, macroeconomic as well as equity aspects. With the prospect of the new 2015 climate

change agreement on the horizon, many developing countries have begun installing and refining

their climate policies. SD benefits in CDM and new market mechanisms actually have the potential to

match developing countries’ needs with regard to both sustainable development and climate mitiga-

tion measures. Therefore, the prospect of enhanced SD assessments could not be more timely.


22

1 Introduction

Combating climate change has gained momentum again. In the run-up to the UN climate change con-

ference in Lima, several major greenhouse gas (GHG) emitters voiced their plans for climate change

mitigation action. The first mover was the EU, which at its European Council meeting in October un-

veiled its new climate and energy package. It sets targets for GHG reduction for at least minus 40 per-

cent domestic (i.e. within the EU) versus 1990, at least 27 percent for renewables in 2030, and at

least a 27 percent efficiency increase versus the same trend line as in the previous package.

Shortly after, in mid-November, the United States and China in a joint statement announced their

respective climate change targets. The US declared a new target to cut net greenhouse gas emissions

26-28 percent below 2005 levels by 2025. At the same time, China as the first developing country

announced targets to peak CO2 emissions around 2030, with the intention to peak early, and to in-

crease the non-fossil fuel share of energy production to around 20 percent by 2030.

These events are going to help build momentum for the international climate negotiations ahead.

They might also unblock the road for a legally binding climate change agreement in Paris at the end

of 2015.

However, a successful achievement of keeping global warming below 2°C must be accompanied by

development that ensures sustainable economies, healthy environments and sustainable societies.

Sustainable Development for a world that can be enjoyed by all is the other side of the coin to climate

change.

Mitigation instruments under the climate regime of the United Nation Framework Convention on Cli-

mate Change (UNFCCC) commonly refer to Sustainable Development. For instance, Nationally Ap-

propriate Mitigation Actions (NAMAs) shall be implemented ‛in the context of Sustainable Develop-

ment‛ (UNFCCC 2009), and mitigation actions in the forest sector should ‛take into account non-

carbon benefits‛ (UNFCCC 2013).

The Clean Development Mechanism (CDM) was equally created with these two sides of the coin in

mind: on the one hand, to achieve cost-effective mitigation of greenhouse gases; on the other, to as-

sist developing countries in achieving Sustainable Development, based on their national develop-

ment priorities.

In literature on the CDM’s contribution to Sustainable Development the strengths and weaknesses of

host countries’ assessment approaches have been identified and analyzed over the years (Figueres

2005; Olsen 2007; Corbera and Jover 2012). Critique is rad that the current set-up is weak due to the

lack of clear and transparent SD criteria by many host countries (Sterk et al. 2009), cases of regis-

tered projects with no SD benefits or negative impacts (TERI 2012) and the lack of requirements or

procedures to monitor, report and verify that intended SD benefits are actually achieved (Olsen and

Fenhann 2008).

Responding to the critique that the CDM is not significantly contributing to Sustainable Development,

the CDM Executive Board (EB) launched a call for input in June-July 2011 to invite comments on how

to include co-benefits and negative impacts in the documentation of CDM project activities, and the

role of the different actors and stakeholders in this process. The issue was raised to the highest politi-

cal level when the Conference of the Parties serving as the meetings of the Parties to the Kyoto Proto-

col (CMP) at its seventh session in Durban requested the Board to ‛continue its work and develop

appropriate voluntary measures to highlight the co-benefits brought about by the CDM project activi-

ties and programs of activities, while maintaining the prerogative of the Parties to define their Sus-

tainable Development criteria“ (UNFCCC 2011). The CMP decision launched the process in 2012 of

the UNFCCC Secretariat cooperating with the UNEP Risø Centre for development of the voluntary Sus-

tainable Development (SD) Tool with the Executive Board deciding on its final outcome.


23

In the Durban CMP decision, there is no reference to negative impacts. This later came to play a cru-

cial role, when members of the Executive Board at its 69th meeting argued there was no mandate for

the SD tool to assess negative impacts of CDM projects. The Secretariat was requested to simplify the

tool by leaving out two of the three elements in an integrated approach to SD assessment, namely

safeguards to avoid negative impacts and enhanced procedures for stakeholder involvement.

In order to identify the tool's possible shortcomings, and to make structured recommendations on

how to improve the EB's SD tool, the German Emissions Trading Authority (DEHSt) has tasked the

Wuppertal Institute and UNEP DTU Partnership (formerly UNEP Risoe Center) with conducting the

research project ”Evaluation and development of recommendations on the CDM EB’s Sustainable

Development tool including the sustainability requirements of other flexible mechanisms‛. Findings

from this project are meant to have a lighthouse effect on the development of provisions on Sustaina-

ble Development within other carbon mechanisms of the UNFCCC and beyond.

This report explains the research and presents the outcomes of the analysis. The following chapter

covers the assessment and comparison of the SD provisions of selected mechanisms and multilateral

standards. The third chapter consists of a literature review and interviews with selected host country

governments, project developers and a buyer perspective on the usability of the EB’s SD tool.

In the fourth chapter, we recall and synthesize findings of the previous two chapters. We discuss pros

and cons of the EB’s SD tool in comparison to other mechanisms (analyzed in chapter 2) and needs

voiced by practitioners (determined in chapter 3). This analysis serves to arrive at structured recom-

mendations for further developing the SD tool, divided into more easily implementable amendments,

and those that would transform the SD tool into a sound assessment tool for SD effects.





24

2 What is offered?

The aim of this chapter is to qualitatively assess the suitability and comprehensiveness of the current

SD tool against international level standards for assessment of Sustainable Development (SD) im-

pacts. We compare what is 'offered' in terms of SD assessment by four certification standards, two

mechanisms within the larger UNFCCC context, and two safeguard policies of Multilateral Develop-

ment Banks, with the current state of the CDM SD tool, to identify strengths and weaknesses of the

tool against 'state of the art'.

2.1 Methodology

2.1.1 Literature review and assessment framework: Selection of standards and policy

frameworks for review

In preparation of our analysis, we compiled, analyzed and reviewed international level practices and

standards for SD assessment. This included the CDM and its own Sustainable Development Tool (the

SD tool), as well as voluntary carbon offset standards such as the (CDM) Gold Standard, the Climate,

Community and Biodiversity Standards (CCB), the Social Carbon Methodology, and others.

We also looked at a number of policy frameworks of emerging mechanisms for mitigation actions,

such as the Low Carbon Development Strategies (LCDS), Reducing emissions from deforestation and

degradation plus conservation (REDD+), the New Market Mechanisms under the UNFCCC (NMM),

units of GHG reductions to be traded under a Framework for Various Approaches (FVA), and the

Green Climate Fund (GCF).

The first insight gained from the literature review was that many of the emerging schemes are at very

early stages of development. For example, the concrete design of the NMM and FVA, respectively, are

far from taking shape; in fact, negotiations under the UNFCCC are deeply deadlocked so that progress

in this arena is not to be expected soon. Therefore, the Federal Environment Agency (UBA) and the

project team decided to exclude schemes such as NMM, FVA, and Least Developed Countries (LDCs)

from the assessment (for the GCF, see below).

A second conclusion from the literature review was that the analysis should cover different types of

SD assessment, as the methodological framework for identifying SD impacts has further differen-

tiated over the years (see also Ürge-Vorsatz et al. 2014). For the project team, it was essential to in-

clude mechanisms that

1. feature not only an assessment, but also a certification scheme

2. go beyond the traditional project-based approach known from the CDM

3. assess both SD co-benefits and co-costs (negative impacts)

4. include meaningful stakeholder consultations

Based on these criteria, the project team developed a shortlist of mechanisms to be assessed. This list

was discussed with UBA and subsequently modified according to the input received. The final selec-

tion includes a range of mechanisms and programs that cover one or more of these core aspects. The

Gold Standard, for example, both includes an assessment of possible negative impacts and displays

an example of a certification approach. The other selection schemes are (see in brackets the represen-

tation of the above-mentioned aspects):


25

▸ CDM Gold Standard (1, 3, 4)

▸ Thailand’s Crown Standard (1, 3)

▸ Social Carbon (1)

▸ CCB (1, 3)

▸ UN-REDD Programme Social and Environmental Principles and Criteria (4)

▸ UNDP NAMA SD tool (2)

▸ Asian Development Bank Safeguard Policy (3, 4)

▸ International Finance Corporation Sustainability Framework (3, 4)

Some of the mechanisms had further qualifications that influenced their choice. For example, Thail-

and’s Crown Standard was chosen because it is based on the CDM, but it features elaborate SD as-

sessment criteria. Therefore, it was felt that this approach could be an interesting match for the com-

parison with the CDM SD tool. The International Finance Corporation (IFC) standards, to take another

example, are also used, albeit on an interim basis, by the Green Climate Fund, which brings in an

element of the newly evolving, innovative climate finance schemes.

It should be noted, though, that the SD assessment criteria presented here and assessed in the follow-

ing, were looked at from a purely theoretical point of view. This means we assessed the way SD as-

sessment is set-up and did not touch in any way on the question whether or not these schemes do

work in practice as this is way beyond the scope of this assignment. For literature on practical, on-

the-ground experience, see, inter alia, TERI 2012 and Dooley et al. 2011.

2.1.2 Assessing the EB’s SD tool against the state of the art in other mechanisms

The review of a variety of mechanisms and related literature shows that applying a comprehensive

approach to Sustainable Development of international financing activities involves basically two

steps of considerations beyond the regular monitoring of direct effects:

▸ An identification of indirect effects and their assessment via monitoring, verification and evalua-

tion

▸ A consideration of stakeholder concerns within and beyond the direct spatial and topical boun-

daries of the activity

2.1.2.1 Identification of related indirect effects and their assessment via monitoring, verification

and evaluation

Financing activities aiming at emissions mitigation and adaptation to climate change not only result

in the reduction of greenhouse gas emissions, the enhancement of mitigation, and adaptive capacity

and adaptation strategies, but may have additional impacts on other environmental, social or eco-

nomic aspects of Sustainable Development. These impacts can be positive or negative or include both

positive and negative elements for different aspects of Sustainable Development.

The most common approach to identify effects of a funded activity is know as ‛results-based man-

agement“ (RBM), and applied by the Organisation for Economic Development (OECD), the Global

Environment Facility (GEF) or other institutions. RBM establishes so called results chains that put

funding goals and results of a funding activity / intervention at different levels. The results are put

into a hierarchical and sequential order (UNDP 2010: 13) organized by the possibility to align effects

more or less directly to the activity. There is a threefold differentiation of effects into (a) outputs (di-

rect effect), (b) outcome and (c) impact (longer term indirect effect). Identifying outputs, outcomes

and impacts of project inputs and activities, a results chain is the foundation of a learning process

which helps to understand whether and how specific activities are expected to contribute to the de-

sired change of the funded activity on the different levels. The results chain provides a framework for

monitoring and measuring the expected changes. Key changes described in the results chain are

translated into targets and associated indicators for tracking results (OECD 2010). Usually, the re-


26

lated monitoring requirements and exercises focus on the outputs and partially on the outcome level

due to the more difficult alignment of indirect effects (problem of alignment and double counting).

There is an emerging discussion on how to go further and align indirect effects, to prevent trade-offs

of such activities (e.g. The World Bank 2010) and hence to apply approaches beyond common RBM.

Significant positive effects should be identified in order to demonstrate the full potential and appro-

priateness of the activity for the host country. Significant adverse effects should be avoided even

when they are beyond the monitoring and reporting scope of direct effects of such activities. They are

assumed as being unintended and as putting successful project implementation at risk.

A ‛risk level“ describes the probability that the project activity results in unintended negative effects

beyond the intended direct climate result. An unintended negative effect can be one that may be an-

ticipated before project approval when considering and assessing the broader project context or may

occur unexpectedly during project implementation or beyond. Both should be considered at the ear-

liest point possible. Going further, the discouragement of adverse effects should be one of a number

of basic trade-off rules for a sustainability assessment (Gibson 2006: 272). This approach is consi-

dered as ‛do no harm“ approach. A do no harm approach is characterized by the application of a risk

management system to prevent from negative impacts by establishing safeguards as mandatory

benchmarks. Such a ‛safeguard system“ can have substantive components, which describe specific

goals and principles, as well as procedural components that outline the processes that are in place to

identify, avoid and mitigate potential activity specific negative impacts (Gibson 2006).

2.1.2.2 Consideration of stakeholder concerns within and beyond the direct spatial and topical

boundaries of the activity

For the long term sustainability and acceptance of activities as well as for the early identification of

potential risks and undesired effects, the involvement of affected communities and individuals

(stakeholder involvement) and the perception of their concerns is crucial for several fundamental

reasons (UN 2008):

▸ First, stakeholders have a right to be involved if they may be affected by an activity.

▸ Second, the involvement and consultation of stakeholders is necessary for the realistic under-

standing of potential obstacles and risks within the project boundary. Moreover, it is important

for the definition of problems, the identification of causes, to get an overview about already exist-

ing measures, to maximize synergies, avoid duplications and ensure coordination.

▸ Third, stakeholders can make valuable contributions for designing and implementing an effective

and beneficial project.

▸ Fourth, stakeholder consultation is crucial for the consideration of effects beyond the boundary

of an activity. This relates to the embeddedness of the activity in the regional/national context.

The consultation should demonstrate appropriate strategies and actions to address expressed de-

mands and concerns and to achieve envisaged impacts. It may help save time, reduce costs and sup-

port the improvement of a project’s performance and impacts. Moreover, stakeholder involvement

generates transparency, trust and accountability and is the basis for building strong, constructive

and responsive relationships, which are essential for successful project implementation and for

achieving targeted results. In doing so, stakeholder involvement increases the steering capacity of an

activity. In particular where local communities are being addressed by a financing activity, stake-

holder involvement is important for ensuring relevance to local priority needs and for strengthening

participation and ownership of the target groups. The role of participatory monitoring has also been

recognized in the Governing Instrument of the Green Climate Fund (UNFCCC, 2011).

Generally, the consultation can take place at different stages of an activity: Before approval, during

the preparation of the activity (to avoid risks), and during the implementation phase (to manage up-

coming risks).


27

Furthermore, it is suggested to institutionalize continuous mechanisms beyond formal stakeholder

consultation processes for dealing with ‛grievances“ or complaints raised by stakeholders with for-

mal rights to appeal to such a grievance mechanism. These independent mechanisms are an element

of a risk management strategy in controversial cases.

While there are no generally established ways to undertake a stakeholder involvement process, sev-

eral approaches and methodologies on how to carry out a sustainable process have emerged from,

and been developed by diverse organizations working in different fields.

Basic elements of a stakeholder involvement process relate to the timing, institutional setting of the

consultation, focus, and documentation of the process are:

▸ Timing: Ongoing engagement of stakeholders (timetables, dates, covering all project phases, con-

sideration of complaints, provision of information…)

▸ Institutional setting: Install core contact (person), facilitation, regular processes, grievance me-

chanism…

▸ Focus: consider power relations, capacities, establish timely processes for identification of rele-

vant stakeholders, define desired outcome and adequate processes…

▸ Documentation: Disclosure of information and other information policies

2.1.2.3 Compilation

Based on the considerations on a comprehensive approach and the selection of standards, we devel-

oped a basic assessment framework (excel matrix) that forms the basis for the analysis of both the

EB’s voluntary SD tool and SD criteria; and processes of the selected mechanisms. It consists of three

categories, namely

▸ Overarching set-up of the standard (architecture)

▸ Assessment of the SD impacts

▸ The provisions for Stakeholder Consultations

In the following, we provide an overview on these three main sections of our basic assessment

framework. The completed excel sheet can be provided upon request.


28

Overarching set-up of the standard (architecture)

In the set-up category, general framing features are considered that are specific for the respective

standard. It contains questions on the assessment object, general assessment methods, bindingness

of requirements, timing of assessments and reviews, compliance and target groups of tools. The crite-

rion on assessment methods contains a description on the general assessment approach of the re-

spective standard, i.e. whether risks are considered, safeguards applied or SD principles defined as

well on the quality of indicators. This general outline of the respective approaches prepares for the

subsequent more specific focus on sustainability impacts. Table 1 shows the set-up section of the as-

sessment framework.

Table 1: Assessment category 'Overarching set up of the standard'

Assessment criterion Type of answer

Object of assessment narrative:

Spatial boundaries of the SD assessment;

Linkages to national strategies

Method of assessment narrative:

Are indicators used?

Is the approach integrated or not in terms of nature-society linkages?

Is the assessment qualitative/quantitative?

Are effects monetized?

Is sustainability as-

sessment mandatory?

y/n

Is the assessment ex-

ante and/or ex-post?

narrative:

Description of assessment method

Is sustainability as-

sessed during approval

process?

y/n

Is an ex post monitoring

and verification manda-

tory?

y/n

Compliance narrative:

Is compliance with national / int'l law assessed?

Is an Environmental Impact Assessment mandatory?

Appliance narrative:

Who uses the tool and to whom is it important?


29

Assessment of sustainability impacts

The assessment of sustainability impacts (Table 2) covers the three SD dimensions which are common-

ly used, i.e. environmental impacts, social impacts, and economic impacts (cp. Sutter 2003, Nuss-

baumer 2008). These three categories are split up into 12 indicators for positive impacts. In fact, this

taxonomy follows the CDM SD tool. We chose this approach because it enables us to easily compare

the SD tool with the other mechanisms. Taking the SD tool taxonomy prepares for an easy identifica-

tion of the variations in the approaches. Moreover, the category 'assessment of SD impacts' also cov-

ers possible negative impacts. The category has to be seen in context of the general approach de-

scribed in the set-up category.

Table 2: Assessment category 'assessment of sustainability impacts'


Which of the following

positive impacts are

covered?

Tick the box:

Environment – Air

Environment – Land

Environment – Water

Environment – Natural resources

Social – Jobs

Social – Health & Safety

Social – Education

Social – welfare

Economic – Growth

Economic – Energy

Economic – Technology Transfer

Economic – Balance of payments

Other

Are negative impacts

(co-costs) covered in

approval / monitoring

processes?

y/n

If yes, which of the fol-

lowing aspects are

covered?

Tick the box:

Violation of human rights

Labor rights violations

Child labor

Forced Resettlements

Destruction of cultural heritage

Discrimination

Unsafe & unhealthy work environment

Corruption

Damage to environment or natural habitat

Other


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Stakeholder Consultations

The category stakeholder consultations (Table 3) contains a description if and how the consultations

are set up., who is consulted, which processes are established, how are concerns are dealt with, how

are complaints solved and which options exist to intervene in approved projects.

Table 3: Assessment category 'Stakeholder Consultations'


How is the stakeholder

consultation process

set up??

Tick the box + explanation, if applicable

Global stakeholders are consulted

Local stakeholders are involved

LS are identified in a structured process

Project doc's available in local language(s)

Is a meeting held with local stakeholders?

Is the meeting place within reach for LS?

A non-technical summary was presented

A meeting report is produced

Stakeholder feedback meeting/communication

SD monitoring plan developed

Other

Is a grievance mechan-

ism established?

y/n + narrative

Is it possible to inter-

vene in approved

projects (corrective

action procedures)?

y/n + narrative


31

2.1.2.4 Synthesis

Taking the information of these three categories of the basic assessment framework (i.e. the excel

matrix), we conducted a comparative analysis of the different approaches to SD assessment. We have

synthesized the wealth of information into four overarching categories:

▸ Scope:

Framings of the standard and the general comprehensiveness

▸ Assessment types:

Design-bases of the standard and how the general approach is implemented. The analysis follows

two sets of criteria:

1. Exclusion criteria (e.g. child labor, forced resettlements): mandatory design elements

and procedures, analyzed by yes/no. If yes, criteria are described

2. Procedural criteria: Identification of indirect effects (e.g. Checklists/scoring systems)

Which effects: how many/how comprehensive (e.g. air quality etc.)

How is it operationalized: which indicators, how to collect and measure data

(e.g. NOx at site/at distance)

▸ Review and Evaluation:

Who is responsible, how is it done, who checks the review? (e.g. monitoring, evaluation, redirec-

tion of activity, verification of Exclusion criteria/Multi Criteria Analysis by independent entity or

standard itself)

▸ Stakeholder Consultation framework:

Involvement of local stakeholder and resolution of concerns.

These categories partially combine information from the categories of the basic assessment frame-

work, allowing for an overarching comparative approach. Disaggregated information on the different

standards and approaches may be gleaned from the assessment framework provided in parallel to

this report.

2.2 Analyzing SD Provisions of Selected Flexible Mechanisms and Multilateral

Institutions

In the following chapter, we analyze the different roads taken in regard to assessing benefits for and

impacts on Sustainable Development.

Chapter 2.2.1 gives an overview of the mechanisms and institutions we have assessed for this report.

We provide the reader with short profiles of each mechanism or institution, highlighting basic func-

tioning, and pointing to notable specialties of the respective approaches, if appropriate.

Chapter 2.2.2 synthesizes our findings into a comparative analysis. In a first step, we explicitly ex-

clude the CDM's SD tool from the analysis, and compare the remaining eight mechanisms' and insti-

tutions' approaches along our four main assessment categories. In a second step, we then compare

our findings with the approach taken by the CDM Executive Board in order to arrive at lessons

learned and possible options for improvement. For each assessment category, we provide a short

overview table summarizing our findings.

2.2.1 Short profiles of the mechanisms assessed

2.2.1.1 CDM SD tool

The ‛Voluntary tool for describing Sustainable Development co-benefits of CDM project activities or

programs of activities (PoA)“ (CDM SD tool) was approved by the CDM Executive Board at its 70th

meeting in late 2012. As stated in the name, the tool is used by project developers of CDM projects or

PoAs who would like to report on positive impacts their project or PoA brings about.


32

The use of the tool is voluntary and it can be used at any time in the lifetime of the respective CDM

activity. This can (but does not need) also include an update in case co-benefits change. The tool does

not comprise any requirements to monitor or verify identified benefits for Sustainable Development.

The CDM SD tool is online-based. Project participants and coordinating/managing entities may re-

quest access to the tool from the CDM tools webpage or may download a word version as an alterna-

tive from the same page.

The tool uses the three basic dimensions of Sustainable Development, i.e. environmental aspects, as

well as social and economic ones. Based on these, the tool uses a taxonomy consisting of generic SD

criteria and indicators. The taxonomy was developed bottom-up from a review on aspects on sustai-

nability, as reported in PDDs of over 2.500 registered CDM projects (Olsen and Fenhann 2008).

In order to balance standardization and flexibility, the taxonomy functions as a menu of generic di-

mensions, criteria and indicators that project participants may choose from. Criteria and indicators

that are not relevant to a project can be skipped and aspects of SD that are not included in the tax-

onomy can be added using an ‘other’ indicator. This allows for a transparent, inclusive and objective

approach to SD assessment.

From the data input into the tool, a declaration report is generated and made public on the CDM web-

site. The tool uses similar formats for all three basic dimensions of Sustainable Development, hig-

hlighting environmental, social and economic benefits for Sustainable Development of the respective

project.

Earlier versions of the tool had comprised safeguards to avoid negative impacts and enhanced proce-

dures for stakeholder involvement as well. However, these were cut out in the course of the decision

making process within the Executive Board.

2.2.1.2 CDM Gold Standard

The CDM Gold Standard (GS) is a premium label for activities under the UNFCCC’s CDM and, since

2006, a certification standard for voluntary carbon credits. It was initiated by the NGOs WWF, South-

SouthNorth (SSN) and Helio International in 2003. Experts and stakeholders were involved in its

development. The CDM Gold Standard ‛aims at promoting investments in renewable energy, end-use

energy efficiency and waste handling and disposal techniques as well as land use and forestry

projects that mitigate climate change, promote (local) Sustainable Development and are directed to-

wards a transition to non-fossil energy systems“ (GS 2013). However, only the requirements for ener-

gy, afforestation and reforestation activities have been released so far. The requirements for the new-

er objectives land use and forestry are not yet available: The draft requirements for agriculture are

currently being tested but the conditions for the implementation of forestry projects are still being

developed (GS 2014). The CDM Gold Standard is overseen by the Gold Standard Foundation, which

consists of and is supported by a secretariat, a foundation board, an independent technical advisory

committee (TAC), and more than 80 international partner NGOs.

The GS provides project proponents with a clear structure that comprises overarching principles, cri-

teria, indicators and parameters. It contains provisions for safeguard assessment, Sustainable Devel-

opment impacts assessment and monitoring of projects: The safeguard system contains a list of seven

overarching principles – the Gold Standard Principles – that are mandatory for all GS carbon market

projects and programs. Each principle contains one or several criteria, which the project is required

to meet in order to obtain GS certification. In order to comply with these principles, project propo-

nents must apply the GS Toolkit document considering Sustainable Development impacts at different

stages. The project developer has to apply the UNDP safeguarding principles to its project and fill out

a "Gold Standard Passport" containing indicators for "Do no harm", for the "Sustainable Develop-

ment Matrix", for the "Sustainable Monitoring Plan", and for "Stakeholder Comments". The gravity of


33

potential risks has to be assessed. The safeguard approach is complemented by a detailed impact

assessment in terms of Sustainable Development (‛Sustainable Development matrix“). Quantification

however is not necessarily required but a plausible qualitative explanation of the potential impacts.

Finally, the project developer has to submit a sustainability monitoring plan. All non-neutral indica-

tors of the Sustainable Development matrix must be monitored in order to verify whether or not the

project has indeed contributed to Sustainable Development as assessed ex ante.

The GS is characterized by a comprehensive and integrated approach to cover Sustainable Develop-

ment issues (on details, see Kreibich et al 2014). The original self-assessment made by the project

proponents using the GS tools and guidelines may be refined as result of the two-step approach for

the involvement of stakeholders and hence lead to a significant improvement of the project design.

With the installation of a grievance mechanism, the GS has made a significant step forward in ad-

dressing potential adverse impacts projects may have on the environment and the society.

2.2.1.3 Crown Standard

The Crown Standard is the Thai government’s approach to conduct an ex ante assessment of the like-

ly contribution of a CDM project to local and national Sustainable Development and to conduct an

initial environmental assessment (TGO 2014 a+b). Project proponents have to complement UNFCCC

requirements with relevant information when submitting a project proposal to the Thailand Green-

house Gas Management Organisation (TGO), which serves as a Designated National Authority (DNA).

On this basis, the TGO will decide on the project approval.

The project proponent’s report has to describe the project and the existing environment, and it has to

include an initial assessment of the environmental impact and the Sustainable Development poten-

tial. The project proponent has to score 24 indicators in the fields of environment and natural re-

sources, social impact, technology deployment/transfer, and economy (TGO 2014b). He/she shall

indicate the details of the assessment and the rationale for scoring. In case of negative Sustainable

Development scores, the project proponent shall delineate the mitigation measures to prevent envi-

ronmental impact of the project. TGO provides guidelines how to perform this assessment and points

to the related laws and regulations.

The Crown Standard is a pure ex ante tool. It does not stipulate a dedicated grievance mechanism

neither it mentions the possibility to intervene in approved projects.

2.2.1.4 Social Carbon Methodology

The Social Carbon Methodology was developed by the Ecologica Institute to deliver high-quality

projects to the voluntary carbon market by monitoring a project’s co-benefits. Six sustainability as-

pects of a project are individually measured using the ‛Social Carbon hexagon“: Social, Human, Fi-

nancial, Natural, Biodiversity, and Carbon. The hexagon serves as a visualization of a project’s bene-

fits, with a scale of zero to six, where the center represents zero access to a resource (Ecologica Insti-

tute 2013).

The project proponent, supported by an approved organization, has to submit a Social Carbon Report

(SCR) with relevant information. First, local stakeholders have to be selected for the collection of in-

formation. Information gathering includes ‛participative methods“ such as interviews and group

meetings, discussing the indicators’ contents. The indicators are laid down in sector- and project-

specific guidelines, which were developed as a bottom-up process by approved organizations for spe-

cific projects. Depending on the project or the community involved, indicators have to be customized.

Thus, the guidelines may continually be amended or new guidelines be added. By the end of 2014,

Social Carbon provides guidelines for the following sectors and project types: Ceramic Sector, Forest

Projects, Landfill, Hydropower Plants, Micro and Small Scale Hydropower Grouped Projects, Efficient


34

Lighting, Fuel Switch in Brazil, Methane avoidance through composting in small and medium sized

swine farms in Brazil, Red Ceramic Factories in Brazil, and Amazon REDD Projects.

Based on the information gathered, a ‛Zero Point“ assessment is carried out to provide for an initial

point of comparison for future developments. Objectives will be developed in an action plan. Six

possible scenarios have to be adopted for each indicator, with the first scenario being the most preca-

rious and the sixth scenario representing the most sustainable situation.

. The previously defined indicators

at ‛Zero Point“ have to increase over the monitoring period. For every year, an SCR has to be devel-

oped.

2.2.1.5 CCB Standards

In 2003, the Climate, Community & Biodiversity Alliance (CCBA) was founded as a partnership of five

international NGOs: Conservation International, CARE, Rainforest Alliance, The Nature Conservancy

and Wildlife Conservation Society. With the goal of promoting the development of forest protection,

restoration and agroforestry projects, it has created the voluntary CCB Standards to identify high

quality multiple-benefit land-based carbon projects. The CCB standards as well es the rules of their

use last revised in December 2013. As of November 2014, for 86 projects in more than 30 countries

validation has been approved, with 22 projects having achieved verification (CCBA Website 2014).

The CCB Standards apply a do no harm approach (safeguard system). Seventeen criteria are defined

in a user-friendly, clearly structured project checklist, split into four sections: General, Climate,

Community, and Biodiversity. These criteria cover those issues that are crucial for avoiding negative

environmental and social impacts of land-based carbon activities. For approval projects must satisfy

all required criteria. Each of the criteria is complemented by numerous detailed indicators. Apart

from safeguards, the CCB Standards also expect projects to have a net positive impact on climate and

biodiversity and to generate net positive impacts on the social and economic well-being of communi-

ties. In order to monitor positive as well as negative impacts of the project, project proponents are to

describe the original conditions in the project area and to describe, evaluate, estimate, calculate or

just demonstrate a range of aspects important for the assessment of a project’s impacts. While the

CCB Standards only contain little guidance on how this should be done, a manual has been devel-

oped to assist project proponents in designing and implementing projects that meet the CCB Stan-

dards’ requirements. However, the use of this manual is voluntary.

A particular strength of the CCB standards is the central role local communities and other stakehold-

ers play throughout the entire project lifetime (Kreibich et al 2014). The CCB Standards require

project proponents to provide access to project documentation, to consult with communities and oth-

er stakeholders and to describe how effective participation in decision-making is enabled. Further-

more, the installation of a grievance redress procedure with different stages for grievance resolution

is required. The application of FPIC (Free Prior Informed Consent) is required if right holders are af-

fected by the project, a provision of particular relevance for projects that involve indigenous peoples.

2.2.1.6 UN REDD

The United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest

Degradation in Developing Countries (UN REDD Programme) was founded in 2008 in order to sup-

port and promote piloting activities under the evolving REDD+ scheme under the UNFCCC. The pro-

gram covers both direct support to the design and implementation of national REDD programs and

complementary activities such as developing common approaches, analyzes, methodologies, tools,

data, and best practices. The Program currently collaborates with more than 50 partner countries in

Africa, Asia-Pacific, and Latin America. The initiative is jointly managed by the Food and Agriculture


35

Organization of the United Nations (FAO), the United Nations Development Programme (UNDP) and

the United Nations Environment Programme (UNEP).

With respect to Sustainable Development the UN REDD Programme has given itself an elaborated

catalogue of ”Social and Environmental Principles and Criteria (SEPC)‛ (UN REDD 2012). It compris-

es 7 principles with 24 criteria, which are consistent with the with the official UNFCCC safeguards for

REDD+ (UNFCCC 2010), but develop these further and take them to a practical level. In an integrated

manner, the SEPC covers aspects ranging from ensuring compliance with national commitments and

Multilateral Agreements, promoting sustainable livelihoods and poverty reduction, protecting natu-

ral forest while maintaining and enhancing multiple functions of forests up to avoiding adverse im-

pacts on non-forest ecosystem services, thereby covering both positive and negative impacts of

REDD+ activities.

The most striking feature about the UN REDD Programme are the‚ Guidelines on Stakeholder En-

gagement in REDD+ Readiness’ which the program has developed together with the Forest Carbon

Partnership Facility (FCPF) (UN REDD and FCPF 2012). In forestry projects, stakeholder involvement

plays an important role as forestry activities by nature involve Indigenous Peoples and other Forest-

Dependent Communities. The UN REDD Guidelines comprise a set of eight guiding principles fol-

lowed by elaborate guidance for eight consultation steps for the stakeholder involvement process,

including a grievance mechanism and the possibility to intervene in ongoing projects or programs.

2.2.1.7 UNDP NAMA SD tool

The UNDP has designed a tool for Nationally Appropriate Mitigation Action (NAMA) developers and

policy makers. The tool allows users to evaluate the Sustainable Development performance indicators

and Sustainable Development results achieved over the lifetime of the NAMA. It is linked to the Sus-

tainable Development Goals (SDGs) agreed at the United Nations Conference on Sustainable Devel-

opment (UNCSD) 2012 and shall allow policy makers to track the effects of the NAMA on environ-

mental conservation, economic growth, poverty reduction and public welfare (UNDP 2014).

Users shall split the NAMA into corresponding activities ("interventions"). Each intervention is as-

sessed separately and the scores summed up to assess the NAMA’s overall contribution to Sustaina-

ble Development. The tool links up SDGs with a set of indicators to evaluate the intervention's per-

formance against these goals. There are no linkages to national strategies or spatial boundaries. NA-

MA developers and policy makers may choose, which of the SD goals and corresponding indicators

they want to evaluate and monitor.

The NAMA developer or policy maker has to identify the impacts of the NAMA himself/herself. In a

dedicated column "effect on indicator", he/she has to classify the impact against the corresponding

indicator as positive, negative or neutral. The tool does not provide any measurement method for the

proposed indicators, but the NAMA developer/policy maker has to develop this method him-

self/herself or he/she has to use an appropriate existing (external) method. As such, the tool does not

give any guidance for indirect effects’ impact assessment.

2.2.1.8 ADB Safeguard Policy

The Asian Development Bank (ADB), established in 1966, is a regional development bank facilitating

economic development in Asian countries. It has 67 members in total, of which 48 are regional. In

order to achieve its goal to end poverty in the Asia and the Pacific, the ADB established three com-

plimentary agenda in its "Strategy 2020" - inclusive economic growth, environmentally sustainable

growth, and regional integration.

The ADB lists environmental sustainability as a "core strategy" on its website (ADB 2009). In order to

ensure sustainability of its services, the ADB adopted its Safeguard Policy Statement (SPS) in 2009

after a four-year policy review process. The SPS builds upon ADB's previous Involuntary Resettle-


36

ment Policy (1995), Policy on Indigenous Peoples (1998), and Environment Policy (2002). It applies

to all ADB-supported projects. The SPS integrates these previously separate three policies into one,

and introduces among others the option of employing domestic country safeguard systems for ADB-

financed projects if they meet ADB requirements. It also includes provisions for transboundary ef-

fects.

The ADB's SPS is a dedicated safeguard policy aimed at ensuring that funded projects and programs

of the ADB "do no harm". In addition to avoiding negative impacts by funded projects, the SPS there-

fore also contains a dedicated negative list of non-fundable project types. This focus on safeguarding

negative impacts sets it apart from most others covered in this study except for the IFC's Sustainabili-

ty Framework (see below), which also cover positive sustainability effects.

The SPS requires that the ADB screens proposed projects for potential adverse environmental im-

pacts, and categorized them into categories A (significant adverse environmental impacts) to C (mi-

nimal/no adverse environmental impacts) for projects directly funded through ADB, or FI for projects

implemented through financial intermediaries. Impacts can be physical, biological, and socio-

economic, including occupational and community health and safety, vulnerable groups, gender is-

sues, and impacts on livelihoods and physical cultural resources.

Category A projects require a full-scale Environmental Impact Assessment to be published 120 days

in advance of project approval. Category B projects only need an initial environmental examination,

while Category C projects do not need such an assessment. Projects by financial intermediaries (Cate-

gory FI) require an Environmental and Social Management System.

The SPS further spells out requirements on the avoidance or, impossible, mitigation of resettlements,

and special safeguards for indigenous peoples. Notably, the SPS itself does not contain detailed pro-

visions on labor conditions. Requirements in this field are covered by a separate, non-integrated ADB

policy.

2.2.1.9 IFC Sustainability Framework

The IFC (International Finance Corporation), founded in 1956, is a member of the World Bank Group.

The IFC is the World Bank's "private sector arm", financing private sector activities directly or

through financial intermediaries in over 100 developing countries. According to the IFC's website,

the organization accounts for about one third of developing country private sector financing by de-

velopment finance institutions over-all. The IFC's overarching goals are to end extreme poverty by

2030, and to boost shared prosperity in every developing country. Strategic priorities include, among

others, to address climate change and to ensure environmental and social sustainability.

This is addressed through the IFC's Sustainability Framework released in 2006, and updated 2012

after an 18-month stakeholder consultation process (IFC 2012). The policy contains eight perfor-

mance standards that IFC clients have to adhere to. Performance Standard 1 (Assessment and Man-

agement of Environmental Risks and Impacts), includes a requirement for all IFC clients to establish

environmental and social management systems, including a sustainability policy. Such management

systems have to include integrated assessments of environmental and social impacts, risks and op-

portunities of envisaged projects, and have to engage affected communities. Performance Standards

2 - 7 establish requirements and objectives needing special attention, including labor and working

conditions (PS2); resource efficiency and pollution prevention (PS3); community health, safety, and

security (PS4); land acquisition and involuntary resettlement (PS5); biodiversity conservation and

management of living natural resources (PS6); indigenous people (PS7); and cultural heritage (PS8).

The IFC's safeguard provisions widely resemble those of the ADB's SPS (see above). The standards

cover quite some detail on the general governance aspects of sustainability management, but do not

have the same level of detail in their specific requirements that have to be met by every single funded


37

asset. Instead, the IFC requires its clients to develop their own frameworks along the required lines,

and reviews them both in the proposal phase and during the projects' duration.

Other than most other standards and requirements analyzed within this study, the IFC's sustainabili-

ty framework does not make any prescriptions on positive contribution to sustainability of a project

proposal. The standards included in the policy serve as safeguards against negative impacts of pro-

posed projects. To the same effect, the IFC also published an exclusion list of projects that by default

cannot receive funding by the IFC.

2.2.2 Comparison and Analysis

2.2.2.1 Scope

The four certification standards (the Social Carbon Methodology, the CCB Standards, the CDM Gold

Standard, and the Thai domestic Crown Standard) generally follow a comparatively narrow approach

to assessing sustainability, focusing strongly on the boundaries of individual projects. Notably, the

CCB standards follow an integrated approach that also considers effects of the project beyond its

boundaries. In addition, all certification standards but the Crown Standard limit themselves to specif-

ic project types.

Because of their focus on specific projects, the certification standards generally do not make refer-

ence to national Sustainable Development strategies or policies a host country may have. A notable

exception is of course the Crown Standard, as it is in itself part of Thailand's national policy. Never-

theless, even the Crown Standard does not have any direct reference to Thailand's over-all strategy

for Sustainable Development, but the standard points to relevant laws and regulations.

The UN REDD Programme represents a special case within this comparison. It offers strategic sectoral

planning and implementation guidance for national governments. It makes strong reference to na-

tional strategies as well as requirements from multilateral agreements. As regards Sustainable Devel-

opment, the approach limits itself to the forestry sector, but covers all possible intervention types

within, including not only physical projects, but also policies. Within its sectoral boundaries, the

approach can therefore be considered to be wider in scope than the market-based approaches.

Even wider in scope, but also less definite, is the UNDP's NAMA SD tool. Nationally Appropriate Miti-

gation Actions do not follow a common definition that delineates what is a NAMA and what is not.

Therefore NAMAs can be everything from single project activities to a bundle of (policy) interven-

tions. The NAMA SD tool therefore currently leaves out any mention of spatial or sectoral boundaries,

making their delineation subject to NAMA developers’ or policy makers’ own valuations. The applica-

tion of the tool is currently being field-tested in partner countries, with NAMA developers and na-

tional governments defining boundaries individually to their circumstance.

The safeguard policies by ADB and IFC both have to cover a wide variety of sectors and project types

because they aim at the whole funding portfolio of the two development banks. In order to safeguard

against potentially harmful impacts, they include assessments beyond the direct scope of the as-

sessed projects, and even consider possible transboundary issues. Assessments have to be conducted

by the clients of the two banks, but are counter-checked and also publicized.

It is important to note that the spatial boundaries the standards set relate to their direct effects (out-

puts and outcomes, see section 2.1.2.1). The actual impact of a project/activity (longer term indirect

effect) may be beyond spatial boundaries. All standards implicitly or explicitly take differences be-

tween outputs, outcomes and impacts into account. E.g., technology transfer may be defined as tech-

nology applied at a project site (output). The Gold and Crown Standards measure the outcome, that

is, they aim at assessing whether foreign technology is locally applicable. A longer-term impact may

be that technologies applied nationally increasingly apply this foreign technology.


38

Table 4: Overview of scope of analyzed approaches

CDM SD tool Social Car-

bon Metho-

dology

CCB

Standards

CDM Gold

Standard

Crown Stan-

dard

UN REDD

Programme

UNDP NAMA

SD tool

ADB Safe-

guard Policy

IFC Sustai-

nability Pol-

icy

Boundary of

Assessment narrow:

project

limits

narrow:

project

limits

project lim-

its, + effects

beyond

boundaries

narrow:

project

limits

narrow:

project

limits

wide: na-

tional scope

n/a, subject

to policy

makers' de-

cisions

wide, in-

cludes

transboun-

dary effects

wide, in-

cludes

transboun-

dary effects

Project

types / sec-

tors

all CDM

types

currently

limited to

certain

project

types, but

can be ex-

panded

forestry,

agriculture,

land use

(biodiversi-

ty)

renewable

energy,

energy effi-

ciency,

waste, land

use, forestry

all CDM

types

all projects

and policies

within the

forestry sec-

tor

n/a, subject

to policy

makers' de-

cisions

funded

projects in

all sectors

funded

projects in

all sectors

Links to na-

tional SD

policies and

strategies

none none none none domestic

CDM SD

Standard,

references

relevant

legislature

to be inte-

grated in

national SD

policies and

strategies

none, sub-

ject to do-

mestic cir-

cumstances

national

plans to be

taken into

account in

project de-

sign and

implementa-

tion

national

plans to be

taken into

account in

project de-

sign and

implementa-

tion

Applicants project im-

plementers

project im-

plementers

project im-

plementers

project im-

plementers

project im-

plementers

policy mak-

ers in na-

tional gov-

ernments

policy mak-

ers and im-

plementers

project im-

plementers

project im-

plementers


39

Comparison with the CDM SD tool

The certification standards mostly assess sustainability within project boundaries, and do not con-

sider in more detail effects that occur outside them. Lessons may be learned from the CCB standards,

but also the development bank policies on how to include farther-reaching effects that projects may

have on Sustainable Development.

The certification standards are bound to a limited number of project types. The UN REDD Programme

only covers the forestry sector. Limiting assessments to certain sectors or project types can facilitate

the development of stringent methodologies and indicators. Project proponents using existing me-

thodologies and assessment guidance may become familiar with the standard’s application and in a

later stage add new methodologies for new sectors or project types. Thus, the application of well-

known methodologies may ease opening the standard for wider application at a later stage

2.2.2.2 Assessment types

Since Sustainable Development is a multi-dimensional process covering environmental as well as

social and economic aspects that can be affected both positively and negatively, there is a plethora of

possibilities how to assess the impacts an intervention may have. This is reflected by the high variety

of approaches analyzed within this study. Basically, the standards may apply a number of exclusion

criteria (eligibility) as well as a certain scoring system for SD benefits (or costs.)

Exclusion criteria may either be positive or negative lists for certain sectors or project types. The prin-

ciple of positive lists is applied by the Gold Standard for energy efficiency and renewable energy

projects. An example for negative lists are safeguard principles, which are used by ADB, IFC, UN

REDD and the Gold Standard.

Checklists and scoring systems commonly apply qualitative assessments that involve plausible narra-

tives on assessed categories of Sustainable Development, and are frequently complemented by quan-

titative measurements.

Exclusion criteria/eligibility

Before project approval, most approaches require an impact assessment that also determines the ac-

tual eligibility of a project for certification (in certification standards), or funding (in Multilateral De-

velopment Banks, MDBs). An exception is the UN REDD Programme, which, as a general standard for

domestic REDD programmes, does not require impact assessments in itself, but suggests the imple-

mentation of such assessments within domestic programs. The Gold Standard as well as both MDB

safeguard policies require project proponents to present "no project" alternatives, and give their ra-

tionale for selecting the project particulars.

A number of standards (CCB Standard, Gold Standard, Social Carbon Methodology) employ positive

lists that determine the project types eligible for certification. The MDBs, on the other hand, have put

in place negative lists that explicitly exclude certain activities from any eligibility for funding.

Checklists and scoring systems

A common method employed by the certification standards, but also the NAMA SD tool, are check-

lists, providing the user with a set of parameters, criteria or indicators that need to be answered nar-

ratively, and/or scored, in order to assess the impacts a project may have on different aspects of Sus-

tainable Development.

We have used the assessment criteria for positive contributions to Sustainable Development provided

by the CDM SD tool as reference for the other approaches analyzed. Most of them do cover these as-

pects, however, they are always not spelled out in the same way. All approaches that do assess posi-


40

tive contributions address environmental and social aspects of Sustainable Development. Surprising-

ly, the UN REDD Programme does not include economic benefits. The Social Carbon Methodology,

the CCB Standards and the Gold Standard partly include economic benefits, but do not follow the

same categorization.

Scoring systems are employed by Social Carbon Methodology, the Crown Standard, the Gold Stan-

dard and the NAMA SD tool. They offer the added value that indicators may also be scored negatively,

which offers a more complete picture of the effects an intervention may have on Sustainable Devel-

opment, as opposed to a mere look at positive effects.

Negative impacts, or co-costs of a project, are covered by all approaches analyzed. The strongest and

most detailed requirements for the assessment of negative impacts can be found in the safeguard

requirements of the multilateral development banks (MDBs), as they are especially geared towards

this type of assessment.

The assessment types covered in this study all are mandatory, even though with different stringency.

The certification schemes require sustainability assessments for all projects aiming to be certified.

The multilateral development banks require initial risk assessments that assign risk categories to the

assessed project. Depending on the strength of the risk, different levels of stringency for further as-

sessment are required. The Crown Standard includes a detailed description of the project and the

existing environment. Based on that, the project proponent shall conduct an initial environmental

evaluation. If the CDM project could not meet all legal requirements (i.e. the Environmental Impact

Assessment, EIA), proper mitigation measures shall be proposed.


41

Table 5: Overview of assessment types


bon Metho-

dology

CCB

Standards

CDM Gold

Standard

Crown Stan-

dard

UN REDD

Programme

UNDP NAMA

SD tool

ADB Safe-

guard Policy

IFC Sustai-

nability Pol-

icy

Mandatory

initial im-

pact as-

sessment

no yes yes yes yes no, but sug-

gestion to

include in

domestic

programmes

no yes, plus

"no project"

assessment

yes, plus

"no project"

assessment

Exclusion

lists no

positive list

positive list

positive list

no no no negative list negative list

Scoring sys-

tems no zero to posi-

tive (hex-

agon)

no positive and

negative

positive and

negative

no positive and

negative

categoriza-

tion of risk

types

categoriza-

tion of risk

types

Inclusion of

safeguard

principles

no no yes yes no REDD+ safe-

guards

no yes yes

Assessment

of positive

contribu-

tions

yes yes yes (differ-

ent catego-

rization of

economic

benefits)

yes (differ-

ent catego-

rization of

economic

benefits)

yes (differ-

ent catego-

rization of

economic

benefits)

yes (ex-

cludes eco-

nomic con-

tributions to

SD)

yes no no

Assessment

of negative

impacts

no yes yes yes no, but ref-

erence to

applicable

Thai legisla-

ture

yes yes focus of

approach

focus of

approach


42

Comparison with the SD tool

Assessing the effects a project may have on Sustainable Development can take on many forms, and at

least in part depends on the general focus of the respective mechanisms. Sustainability effects in-

clude a number of qualitative criteria such as equity. The standards operationalize their assessment

by either demanding qualitative descriptions or by introducing a narrative that translates certain

project conditions into a scoring system. For example, Social Carbon Methodology’s indicators re-

ceive scores ranging from the worst scenario (level 1) to the ideal situation (sustainable use of re-

source – level 6).

Again, it may be difficult to measure (indirect) impacts. Firstly, they may occur only in the longer

term, whereas issuance of Certified Emission Reductions (CERs) may stop after seven or ten years of

project implementation. Secondly, it may be difficult to assign indirect impacts to (single) project

activities.

The certification standards are meant to add value to the certificates their projects generate, and as

such are geared towards demonstrating positive effects on Sustainable Development. On the other

hand, it is very important to also ensure that projects do not generate negative impacts. Our analysis

shows that all approaches include negative impact assessments to some extent. A scoring system, as

employed by the Gold Standard and the NAMA SD tool, allows for an evaluation of both positive and

negative effects without overburdening the analysis. 1

On the other side of the spectrum, the safeguard policies of the multilateral development banks are

not geared towards added value, but risk minimization. They represent mandatory steps that every

project needs to fulfill in order to be eligible for funding. They are meant to ensure that projects have

the least possible negative impact on Sustainable Development. Lessons may be learned from the

practice to categorize projects according to their expected risk to Sustainable Development, and to

assign levels of stringency for further assessments accordingly. However, care needs to be taken to

also ensure that project practice does not exceed envisaged risks.

The inclusion of positive (inclusion) or negative (exclusion) lists can add value to a sustainability

assessment. Positive lists give quick insight on which type of project is eligible under an approach,

while negative lists preclude any project type that is deemed non-sustainable, or non-eligible for any

other reason. If an approach aims at a large number of different project types in many different sec-

tors and countries, negative lists may be easier to handle, as positive lists can become unwieldy if too

many project types get included.

When comparing the standards we analyzed with the SD tool, the first eye-catching difference is that

the tool covers co-benefits only and is silent on safeguards or an assessment of co-costs / negative

impacts. This becomes all the more relevant when considering the reports that claim there are CDM

projects with negative impacts on the local environment and / or on local population (see, inter alia,

Gujarat Forum on CDM 2013, Schade and Sterk 2014, TERI 2012). A thorough risk assessment would

bring the discussion onto a structured level.

Applying positive and / or negative lists was discussed in the early days of the CDM, when the EU

proposed that ”Parties should use technologies in a way that minimizes any adverse environmental

and social effects‛ and suggested that the CDM should use ”a positive list of safe, environmentally

sound eligible projects‛. This list comprised renewable energy, energy efficiency, and demand side

management projects (UNFCCC 2000). However, this approach did not prevail. It was the EU again

1 However, these approaches rely first of all on a self-assessment of the project developer. External vali-

dation/ verification involves higher transaction cost.


43

who introduced negative lists through the back door when the block excluded credits stemming from

projects destroying HFC-23 and N2O from adipic acid production in its Emissions Trading Scheme

from 2013 on.

2.2.2.3 Review and Evaluation

For a continuous oversight on effects on sustainability, it is important that ex-ante assessments on

possible effects are followed up through monitoring systems over the project duration.

Only the Crown Standard does not meet this criterion - it only includes a mandatory ex-ante assess-

ment. The Gold Standard, by contrast, requires project implementers to submit a sustainability moni-

toring plan that includes all indicators with positive or negative scores (see above), and to submit

monitoring reports that need to be verified by an independent auditor. The CCB Standard and Social

Carbon Methodology employ similar methods. The SCM approach demands projects to continuously

improve the initial situation. That is, the sustainability scores have to increase over the monitoring

period.

The MDBs require their clients to continuously monitor risks, and set up dedicated social and envi-

ronmental management systems for projects that fall under the high risk category. Monitoring is re-

viewed by MDB representatives.

The UNDP NAMA tool features mandatory monitoring, which needs to be carried out every three

years. The tool requires NAMA implementers to establish monitoring procedures for each interven-

tion the NAMA covers. The nature of the monitoring system can be defined by the implementing

agency. A Quality Assurance / Quality Control (QA/QC) system ensuring data quality is obligatory.

The UN REDD guidelines also foresee monitoring and reporting frameworks.

An additional control measure is the verification of the SD effects included in the monitoring plan by

an independent auditor. This step ensures compliance and therefore adds to the reliability and credi-

bility of the SD assessment. The Gold Standard has provisions in this regard, and the CCB and SCM as

well. These external processes are complemented by a review of the validation and verification re-

ports by the standards’ organizations.

The IFC requirements on auditing are less stringent, yet the organization encourages internal inspec-

tions and audits in order to verify compliance and progress toward the desired outcomes of interven-

tions. Furthermore, the organization has established three oversight functions that may evaluate ap-

praisal and supervision documents (Compliance Advisor/Ombudsman, The Internal Audit Vice Pres-

idency, Independent Evaluation Group for Private Sector). The ADB follows a similar procedure. For

projects involving Indigenous Peoples, the institution has established mandatory requirements in-

cluding experienced external experts or qualified NGOs that verify monitoring information and sug-

gest on corrective actions, which the borrower/client has to follow-up with.


44

Table 6: Overview of monitoring requirements


bon Metho-

dology

CCB

Standards

CDM Gold

Standard

Crown Stan-

dard

UN REDD

Programme

UNDP NAMA

SD tool

ADB Safe-

guard Policy

IFC Sustai-

nability Pol-

icy

Mandatory

monitoring

of interven-

tion impacts

no yes yes yes no yes yes dependent

on risk level

of project

dependent

on risk level

of project

Independent

review no yes yes yes no n/a n/a review by

bank audi-

tors, exter-

nal review

for involve-

ment of in-

digenous

peoples

review by

bank audi-

tors, exter-

nal reviews

for certain

projects

Possibility

for correc-

tive action

no yes n/a yes no yes n/a yes yes


45


In order to adequately assess a project's effects on Sustainable Development, both ex-ante assess-

ments establishing their eligibility and ex-post monitoring and evaluation requirements should be

considered. In order to arrive at a stringent implementation of a standard or methodology, ex ante

assessments and ex post monitoring should apply the same SD criteria.

Most of the analyzed approaches do cover both ex-ante and ex-post assessments. This sets them apart

from the SD tool's approach, as it only requires a single evaluation. This gives the SD assessment of

the tool a purely declaratory nature.

If the SD tool is further developed towards a review and evaluation approach which is similar to cur-

rent other SD standards, then there are basically two options: First, the tool could demand project

developers to demonstrate that the effects claimed ex ante are verified ex post. Secondly, it could

demand project developers to score the initial situation (or baseline) against the actual SD outcomes.

The latter option would allow for a relative comparison of the ‛with project“ and the ‛without

project“ situations.

In order to give credibility to review and evaluation efforts, the use of external auditors can be highly

recommended. The Gold Standard, the SCM and CCB standards cover this step which is needed to

ensure that a project did fulfill its requirements, and, in case of certification, can receive the intended

certificate. The MDBs do not prescribe external auditing as a mandatory step but they have internal

review procedures in place, and in some cases require external check-up as well. Again, this step is

missing in the CDM SD tool.

2.2.2.4 Stakeholder consultation

One of the most important aspects to ensure that projects contribute to and do not harm Sustainable

Development is the formalized consultation of stakeholders ideally over the entire lifecycle of a

project in order to identify and avoid negative effects (pre-approval) and identify and manage upcom-

ing negative effects during project implementation.

By far the most approaches covered here have included mandatory stakeholder consultation

processes into their project design, albeit with varying strictness. Surprisingly, the NAMA SD tool is

an exception to this. It can only be assumed that this may be due to an underlying thought that NA-

MAs are primarily state-driven, and stakeholder processes would be covered under a sovereign's do-

mestic policies.

Among those having requirements, approaches of designing a stakeholder consultation process vary.

Global stakeholders are consulted to different degrees under the different approaches. Of the certifi-

cation standards, only the Gold Standard has established procedures that open the local consultation

to globally active stakeholders/NGOs if they are engaged in the GS. The MDBs require that high-risk

projects draft environmental impact assessments to be published 120 days prior to project approval.

Local stakeholder consultations are included in all but the NAMA SD tool. In order to identify stake-

holders, all approaches include structured processes, stakeholder meetings and project reference

material in local languages (note that this is unclear for the Crown Standard, as its guidelines are

available in Thai only).

While the IFC requirements depend on the specific project type, most other standards have generally

applicable procedures how to involve stakeholders. Differences, however, exist in the stringency of

stakeholder integration: the Gold Standard requires two meetings with stakeholders during the ap-

proval process, and includes a requirement for continuous stakeholder consultations over the whole

project duration. The MDBs have implemented similar requirements, and also posit that consulta-

tions are to be intensified if there is a potential for significant adverse effects of a projects. The CCB


46

Standards contain several detailed requirements on the engagement of local communities and other

stakeholders through full and effective participation. Inter alia, projects are to explain how stake-

holders have been identified, how they have been involved in project planning and design, and how

the continuation of communication and consultation between the project proponent and the stake-

holders throughout the life of the project is ensured.

Indigenous peoples receive special attention by a number of approaches. The UN REDD Programme,

the MDBs and the CCB Standards make special reference to the need for free, prior and informed con-

sent (FPIC) of indigenous peoples. FPIC describes a process that goes beyond the mere consultation

of affected stakeholders. It gives stakeholders the possibility to withhold their consent to project im-

plementation after an extensive exchange process has taken place. If applied resolutely, can be a

show-stopper for projects not consented to by the local people. The MDBs as well as the UN REDD

Programme provide for dedicated policies for the inclusion of indigenous peoples into the project

assessment process.

Grievance mechanisms are another important element of stakeholder consultation to ensure that

Sustainable Development complaints are heard and solved over the duration of the project. In prac-

tice, most of the standards analyzed have procedures in place for or at least encourage to deal with

grievances or complaints raised by stakeholders during project implementation. Such mechanisms

are to implemented by the project proponents themselves. The ADB allows for grievances to also be

addressed to its accountability mechanism if a problem cannot be resolved. The CCB standards as

well as the Gold Standard encourage to employ independent mediation processes in order to resolve

grievances brought forward by stakeholders. Grievance mechanisms are not explicitly required in the

Social Carbon Methodology. For the Crown Standard it is unclear (Thai language).


47

Table 7: Overview of stakeholder requirements

CDM SD tool

Social Car-

bon Metho-

dology

CCB

Standards

CDM Gold

Standard

Crown

Standard

UN REDD

Programme

UNDP NAMA

SD tool

ADB Safe-

guard Policy

IFC Sustai-

nability

Policy

Mandatory

stakeholder

consulta-

tions

no yes yes yes yes yes n/a yes yes

Global

stakehold-

ers

no no no yes no no n/a 120-day

prior publi-

cation of

EIAs for

high-risk

projects

120-day

prior publi-

cation of

EIAs for

high-risk

projects

Local stake-

holders no yes yes yes yes yes n/a yes yes

Structured

processes

for identifi-

cation

no yes yes yes n/a yes n/a yes yes

Meetings

with stake-

holders

no yes yes 2 meetings

during ap-

proval

+continuous

involvement

n/a yes n/a continuous

involvement,

intensified

consulta-

tions if high

risk

continuous

involvement,

intensified

consulta-

tions if high

risk

Local lan-

guage PDs no yes yes yes n/a yes n/a yes yes


48

CDM SD tool

Social Car-

bon Metho-

dology

CCB

Standards

CDM Gold

Standard

Crown

Standard

UN REDD

Programme

UNDP NAMA

SD tool

ADB Safe-

guard Policy

IFC Sustai-

nability

Policy

Considera-

tion of indi-

genous

peoples

No yes yes yes n/a yes,

+inclusion

of FPIC prin-

ciple

n/a yes,

+inclusion

of FPIC pin-

ciple

yes,

+inclusion

of FPIC pin-

ciple

Grievance

mechanisms no no, but in-

cluded in

monitoring

procedure

yes integrated in

project de-

sign, inde-

pendent

mediator

possible

n/a mechanisms

for griev-

ance, con-

flict resolu-

tion and

redress re-

quired

n/a local griev-

ance me-

chanism

required

establish-

ment of a

grievance

mechanism

supported


49


The experiences of the analyzed standards show that SD assessments should be accompanied by and

carefully consider how local communities and other stakeholders could be actively involved in

project development and implementation. While the important role of stakeholders has been recog-

nized by all instruments analyzed but the NAMA SD tool, there are differences regarding the degree of

participation.

By contrast, the CDM SD tool does not contain any mentioning of stakeholder consultation neither as

a voluntary option to consider nor by providing pure blank space to report if such procedures should

exist in a project anyway. This complete suppressing of the issue is the more interesting as there are

provisions for stakeholder involvement in the CDM itself and the pre-final draft of the SD tool covered

stakeholder involvement and even a grievance mechanism. Clearly, the voluntary character of the SD

tool should be reconsidered.

In the absence of any requirements, the SD tool can clearly build on the experiences made by the ana-

lyzed standards to ensure the successful participation of stakeholders throughout the project lifetime.

Such provisions should, in particular, provide a key role for local communities and other stakehold-

ers in the process of the measurement, reporting and verification of potential adverse environmental

and social impacts.

The involvement of stakeholders during project implementation should not replace, but rather com-

plement mechanisms that allow stakeholders to explicitly file grievances related to projects. By in-

stalling appropriate reporting requirements, it can be ensured that concerns raised at the project level

are communicated to the highest governance level while adequate monitoring provisions make sure

that remedies will be implemented and supervised, where appropriate.

2.3 Summary

In this chapter, we have analyzed Sustainable Development requirements of selected Carbon Finance

instruments and multilateral standards and compared them to the provisions of the CDM’s SD tool.

This section summarizes the results of the analysis.

Regarding scope, we see variations that can be mainly attributed to the over-all focus of the different

approaches analyzed. The four certification standards are designed for, and therefore widely follow,

the logic dictated by Carbon Market projects, with relatively narrow assessment boundaries and a

strong project focus. This makes them most easily comparable to the CDM SD tool, showing possible

improvements of the approach to SD assessment already practiced in the Carbon Market context.

The approaches taken by the IFC and ADB (and with slight variations most other MDBs as well) may

serve as examples for detailed safeguard policies in a very wide portfolio of activities. In contrast, the

UNDP's NAMA SD tool shows the difficulty in defining scope if activity types and specifics are highly

unclear.

Looking at the way SD is assessed, our analysis shows that there is a wealth of different approaches

on how to assess the impacts an intervention may have. Many make use of exclusion criteria to define

eligibility as well as scoring system for SD benefits and / or costs (negative impacts). The Gold Stan-

dard, for example, applies the principle of positive lists in that exclusively make energy efficiency

and renewable energy projects eligible for the standard. The MDBs, on the other hand, have put in

place negative lists that explicitly exclude certain activities from any eligibility for funding.

Most certification standards assessed, but also the NAMA SD tool, use checklists that provide the user

with a set of parameters, criteria or indicators that need to be answered narratively, and/or scored, in

order to assess the impacts an intervention may have on different aspects of Sustainable Develop-


50

ment. An example is the Social Carbon Methodology’s indicators, which receive scores ranging from

the worst scenario (level 1) to the ideal situation (sustainable use of resource – level 6).

The standards assessed in this assignment all check upon positive and negative impacts (co-costs).

The strongest and most detailed requirements for the assessment of negative impacts are reflected in

the safeguard requirements of the multilateral development banks, as they are especially geared to-

wards this type of assessment.

All SD requirements we studied are part of a mandatory system for SD assessment of the respective

mechanisms. The stringency of the assessment, however, varies. The certification schemes (CDM

Gold Standard, Crown Standard, Social Carbon, CCB) require sustainability assessments for all

projects aiming to be certified. The MDB standards, by contrast, comprise initial risk assessments.

These assign risk categories to the assessed intervention, with the aim of ensuring that projects have

the least possible negative impact on Sustainable Development.

Regarding review and evaluation, we found that the majority of the systems studied have imple-

mented systems that monitor the possible impacts identified in the ex-ante assessments. Gold Stan-

dard users, for example, are asked to submit a sustainability monitoring plan covering all indicators

with positive or negative scores, and to submit monitoring reports that need to be verified by an in-

dependent auditor. The CCB Standard and Social Carbon Methodology apply similar schemes.

The MDBs require their clients to continuously monitor risks and to develop specific social and envi-

ronmental management systems for high-risk category interventions. Monitoring is reviewed by MDB

representatives. Monitoring also required by the UNDP NAMA tool, which needs to be carried out

every three years. The tool requires NAMA implementers to establish monitoring procedures for each

intervention the NAMA covers. The UN REDD guidelines also foresee monitoring and reporting

frameworks as well.

A follow-up step to monitoring is having the SD effects included in the monitoring plan verified by an

independent auditor. This ensures compliance and therefore adds to the reliability and credibility of

the SD assessment. The Gold Standard has provisions in this regard, as do the CCB and SCM. These

external processes are complemented by a review of the validation and verification reports by the

standards’ organizations.

Finally, most approaches covered here have included dedicated mandatory stakeholder consultation

processes into their project design, albeit with varying strictness. While provisions for the involve-

ment of global stakeholders vary, all approaches except the NAMA SD tool require local stakeholder

consultations. They include structured processes to identify stakeholders, hold stakeholder meetings

and project reference material in local languages (provisions unclear for the Crown Standard). Guid-

ance varies with respect to the stringency of the stakeholder involvement: the CCB Standards, for

example, feature detailed requirements on the engagement of local communities and other stake-

holders through full and effective participation. Inter alia, projects are to explain how stakeholders

have been identified, how they have been involved in project planning and design, and how the con-

tinuation of communication and consultation between the project proponent and the stakeholders

throughout the life of the project is ensured.

Grievance mechanisms are a means of ensuring that controversial issues can be voiced and solved

over the lifetime of the project. The majority of the standards analyzed have procedures in place for or

at least to encourage to dealing with grievances or complaints raised by stakeholders. The ADB, for

example, allows for grievances to also be addressed to its accountability mechanism if a problem

cannot be resolved. The CCB standards as well as the Gold Standard encourage using independent

mediation processes in order to resolve issues brought forward by stakeholders.


51

Comparison to the SD tool

The analysis above shows that most mechanisms analyzed apply an integrated approach to Sustain-

able Development assessment. They require the ex-ante assessment of both positive and negative

impacts the respective interventions. Alternatively, they make use of safeguard and / or risk assess-

ment systems. All these systems are mandatory for the respective project developers or client. Anoth-

er important component of these systems is that they subsequently follow-up upon the claims made

in the initial SD assessment in that they have monitoring systems in place. Some systems additionally

require an obligatory verification of the benefits claimed. Last not least, a vital part of an integrated

approach to SD assessment is a meaningful stakeholder interaction procedure, which enables people

affected by interventions to voice their concerns combined with the possibility to embark on correc-

tive actions. This is at best paired with a grievance mechanism.

By way of contrast, the CDM SD tool does not make use of the full potential an integrated approach

offers. The tool does assess positive impacts in a structured manner. However, the claimed benefits

are neither monitored nor verified. Negative impacts or possible risks are not assessed. Despite the

global and local stakeholder procedures in the CDM in general, these do not cover SD aspects specifi-

cally, as they are not included in the CDM SD tool. Last not least, the tool is voluntary and can only be

used by project proponents and coordinating managing entities. These shortcomings make the tool a

primarily a marketing instrument, albeit in the absence of monitoring procedures with a questionable

reliability.

This is all the more regrettable because integrating all or some of the components mentioned above

could address criticism voiced against the CDM. For example, some CDM projects are being criticized

for causing negative impacts for the local population (see above). A thorough risk assessment, com-

bined with a meaningful stakeholder interaction, would clearly help managing these claims, improve

the project results, and contribute to greater acceptance of CDM projects.

The pure declaratory nature of the SD tool could be overcome if SD effects claimed would be moni-

tored and verified. Again, this measure would strengthen both the SD assessment itself and the cre-

dibility of the mechanism as a whole. In fact, some DNAs such as the Philippines and Nepal have

already introduced measures to follow-up on the SD claims made in the PDDs and assessed by the

respective DNAs.

The use of external auditors that verify the monitored effects can be highly recommended. This

measure adds credibility to review and evaluation efforts. Making SD assessment mandatory would

underline the importance of the different elements, again adding credibility.

Adding some or all of these requirements does not necessarily result in burdening project proponents

with intolerable extra cost. Sterk at el. (2009), for example, have shown for the additional steps of the

Gold Standard assessment that project proponents perceive them as manageable, and that they can

be met with a reasonable amount of additional work.


52

3 What is needed?

The previous chapter provided an overview of how different organizations approach the assessment

of Sustainable Development impacts, and compared them to the current status quo of the CDM SD

tool.

This chapter takes the SD tool's status quo as a basis for a literature review and interviews with se-

lected host country governments, project developers and a CER buyer. It seeks to assess how practi-

tioners perceive the usability of the EB’s SD tool, their views on what would be needed for further

improving the tool, and how the tool can feed into discussions on SD assessment beyond the CDM. In

short, the chapter seeks to condense the 'needs' of the tool's users in comparison to what it currently

offers.

3.1 Methodology

The aim of this work package is to assess the appropriateness of the EB’s voluntary SD tool against

host country needs for sustainability assessments of CDM projects and other user perspectives. Data

for this analysis will be derived from a literature review on DNA practices for SD approval of CDM

projects and from a survey of concrete experiences with users of the tool.

The work package comprises the following steps:

1. Literature review of DNA practices for SD approval of CDM projects

2. Survey of selected host country and project proponent’s experiences and needs for using the

EB’s SD tool and for sustainability assessment of other mitigation actions

3. Assessment and analysis of survey results and literature with regard to host country needs

and difficulties with an aim to assess how the SD tool may assist DNAs, project proponents

and buyers in broadening consideration for SD in the approval process.

3.1.1 Literature review and survey of experiences with use of the EB’s SD tool

In the first step, we compile and review existing literature on experiences with SD assessment ap-

proaches in host countries focusing on the role of DNAs to meet the objective of contributing to Sus-

tainable Development. A synopsis of the literature will identify the issues and research questions

explored, the methods and data applied and assess the key findings and conclusions of the studies as

background to understand the rationale and usability of the EB’s SD tool. We include this step in or-

der to gain a more comprehensive picture of host country needs beyond the survey. Outcomes com-

prise a short synopsis of the relevant literature that will directly feed into the overall assessment. By

providing a foundation of existing practices, this literature review will expand the base of informa-

tion on host country needs, and thus further enhance insights gleaned from the survey developed in

the second step of this work package.

In the second step, we conduct a series of interviews with selected host country DNAs and project

proponents in order to get on-the-ground information on their respective needs regarding the as-

sessment of Sustainable Development impacts within CDM practice. The work consists of three con-

secutive steps, which we elaborate upon below:

a) Selection of countries and interviewees

b) Development of an interview concept

c) Conducting the interviews


53

Selection of countries and interviewees

We select 6-10 interviewees for the survey including a mix of host countries and other users of the

tool. Countries cover a broad range of different aspects for the survey to gain the maximum repre-

sentative potential. Criteria for country selection include:

▸ Experience with CDM

Countries with strong experience regarding CDM activities may be able to provide stronger in-

sights on Sustainable Development impacts. Countries with a comparatively small record of CDM

activities may be able to look at the issue with "fresh eyes" beyond established CDM project prac-

tice.

▸ Experience with domestic SD / co-benefit assessments

Some countries have taken great effort to establish elaborated national systems for assessing the

CDM projects’ contribution to Sustainable Development (cp. Brazil, Thailand). These countries

provide valuable practical experience on SD assessments in a domestic context.

▸ Experience with the voluntary SD tool

To this date, the EB's voluntary tool has only been applied by a limited number of project propo-

nents. A correspondingly low number of countries (China, India, Argentina, Guatemala, Thailand

and 26 African countries hosting CPAs of a multi-country PoA) can report on experiences made in

the application of the tool, and provide information on opportunities and pitfalls. Only the coun-

tries where the tool has been or is currently applied, can provide practical knowledge on the use

of this tool.

▸ Size of country and geographical representation

Relative to their size, geographical location and political priorities countries may see varying

challenges in applying the tool, e.g. due to additional cost, political considerations or bureaucrat-

ic efforts.


54

A screening of countries along the criteria proposed above and in consultation with the contractor

has led to the selection of countries and project proponents as shown in Table 8. 12 invitations for

interviews were sent in early December 2014 and 8 interviews were conducted in the period Decem-

ber 2014 and January 2015.

Table 8: Countries selected for the survey

CDM Expe-

rience

Basic / great

effort in as-

sessing SD

SD tool use Size

Invitation

for interview

accepted

Brazil high great effort no large yes

Thailand medium great effort yes, 1 report medium no

Cambodia low

request for

support on

monitoring

SD benefits

at EB79

no small yes

India high basic yes large no

South Africa medium great effort

yes,

1 report

(supranational

PoA)

medium

large no

Uganda medium basic no medium yes

China High basic 6 reports large yes


55

The interview concept

In order to obtain the highest amount of information and to achieve a high degree of comparability,

we developed a semi-structured interview guide that:

▸ Contains a very short introduction of the interview topic that will lead into the interview itself

and;

▸ Structured questions aimed at capturing the wealth of in-country views as described in the box

below

Interview topics for semi-structured interviews

The following list represents the main topics covered in the survey. The full questionnaire is in-

cluded in Annex 1.

Domestic experience with SD assessment of CDM projects:

Elaboration of nationally appropriate SD criteria

Approval process for granting Letters of Approval (LoAs)

DNA capacity needs to follow up on initial SD assessments, and to verify that CDM projects

contribute to national SD criteria

Views on procedures for elaborating additional effort for project proponents

Procedures for stakeholder involvement

Safeguards against negative impacts

Needs for MRV of SD co-benefits

SD tool specifics

General individual views or experience on / with tool

Evaluation of the additional effort and the usability of the tool

Possibilities for expanding the tool

Views on making the tool mandatory

Interaction with CDM project developers submitting the SDC report

Beyond the tool – National sustainability assessment and other mitigation actions

Options and views on quantification and valuation of SD co-benefits

Possibilities to enhance domestic dialogues on Sustainable Development through strengthen-

ing SD within CDM

Usefulness of the tool in terms of harmonization of SD efforts within other mechanisms

Interest in certification of carbon units with national Sustainable Development impacts

Compliance with a human rights based approach in all climate change actions

Interviews

The interviews were conducted in two ways depending on the availability of the informant: 1) live

during week one of the COP 20 in Lima or 2) over the telephone in December/January. Interviews

followed the interview guide developed in the previous step and were recorded for back-up and veri-

fication. Notes were taken during the interview complemented by the sound record to capture details.

Transcriptions have not been made and original data is treated with confidentiality. Interviewees

were invited to speak in their capacity as representatives of an institution, from the perspective of the


56

position they hold and their role in relation to SD assessment of CDM projects. By not mentioning

names and positions of people interviewed the information is treated as semi-anonymous.

Interviewees were as follows:

▸ Ministry of Water and Environment, DNA Uganda

▸ Ministry of Science, Technology and Innovation, DNA Brazil

▸ Ministry of Environment, DNA Cambodia

▸ National Development and Reform Commission (NDRC), DNA China

▸ Market Development Department, Swedish Energy Agency, Sweden

▸ Swiss Carbon Assets Ltd. / Pure Water Ltd. (companies of the South Pole Group) Developer of

multi-country PoA in Africa on International water purification program

▸ Green Development AS, Developer of multi-country PoA in Africa for the Reduction of emission

from non-renewable fuel from cooking at household level

▸ Enaex, Developer of the Catalytic N2O destruction project, Chile

3.1.2 Analysis of the literature and interviews to assess usability of the EB’s SD tool for

host country DNAs and other users

The analysis of knowledge from the literature review and interviews on the usability of the EB’s SD

tool for host countries and other users of sustainability assessment of CDM projects covers two broad

analytical dimensions:

1. Concrete experience with SD appraisal of CDM projects, and specifically with the EB’s SD

tool.

We evaluate the needs and difficulties of host countries, and the views they have expressed on

possible further elaborations of the tool. The analysis differentiates between experiences by DNAs

with domestic SD assessment procedures, and concrete first experiences with the voluntary SD

tool. This differentiation serves to draw a more complete picture on opportunities and pitfalls for

SD assessments in national circumstances.

2. Lessons learned for SD appraisal in general, how SD tool experience can be relevant

beyond CDM

We compare and analyze the interviewees' answers in order to arrive at some more generalized

lessons that can be drawn from interviewees' experiences for the DNAs' assessment of SD impacts

in general. We complement our findings with existing literature’s conclusions to bolster the anal-

ysis. At this more abstract dimension, lessons learned will go beyond specific CDM national expe-

riences and explore the relevance of SD appraisal for other mitigation mechanisms.

3.2 Synopsis of literature review of DNA practices for SD assessment of CDM

projects

Since early reviews of the CDM’s contribution to Sustainable Development (Olsen 2007; Paulsson

2009), the literature has proliferated with 377 articles on the topic of ‘CDM and Sustainable Devel-

opment’ found in the Web of Science by January 2015. Focusing on the subset of articles addressing

governance of the CDM’s contribution to SD and particularly the role of host country DNAs, the re-

view covers 18 studies from both the academic and grey literature including technical and policy

papers (see Annex 2 for an overview literature reviewed). The review consists of three parts address-

ing the following issues: 1) State of knowledge on the CDM’s contribution to SD, 2) Governance of the

CDM’s contribution to Sustainable Development – the role of host country DNAs, market players and

global rules and 3) Evaluation of the EB’s SD tool.


57

3.2.1 State of knowledge on the CDM’s contribution to SD

The early literature reviews of the CDM’s contribution to SD concluded that without a price on the SD

co-benefits of CERs in the carbon market, the CDM does not significantly contribute to Sustainable

Development (Olsen 2007; Paulsson 2009). Since then, new topics explored in the literature include

a broad range of issues, such as how to direct CDM projects towards national SD priorities for energy

technology in five developing countries (Karakosta, Doukas et al. 2009), the SD contribution of com-

posting projects (Rogger, Beaurain et al. 2011), win-win outcomes for stove replacement programs

(Simon, Bumpus et al. 2012) and if the CDM can deliver SD for rural communities (Subbarao and

Lloyd 2010).

Key questions and issues identified in the early literature remain as challenges, in particular: 1) The

lack of a common definition of what Sustainable Development means, which makes it hard to meas-

ure and compare SD impacts across countries in an objective manner; 2) The trade-off between the

two objectives of the CDM known as a ‘race-to the-bottom’ (Sutter and Parreño 2007), where competi-

tion among host countries for CDM investment creates an incentive to lower the SD standards to at-

tract investment; and 3) The role of host countries institutional capacity to govern that CDM contri-

butes with SD benefits to the country.

In the absence of a common definition of Sustainable Development, the most common approach to

answer the question ‘how does the CDM contribute to SD’ is a project-by-project approach based on

various definitions of SD. In 2011 and 2012, the UNFCCC published a report on the ‘Benefits of the

Clean Development Mechanism’ (UNFCCC 2012a). The SD benefits were assessed project-by-project

using a definition with SD indicators to analyze the claims in PDDs of 3,864 projects registered by

June 2012. Acknowledging that claims in the PDD at project design stage may not materialize during

project implementation, a survey of 392 projects was conducted to compare PDD statements with

actual SD impacts of projects implemented. The reliability of the SD assessment verified by the survey

suggests that almost all CDM projects claim multiple Sustainable Development benefits, which vary

considerably by project type.

This positive conclusion is supported in a study by He, Huang et al. (2014) that adopt a different

measure of Sustainable Development, namely the sustainability adjusted Human Development Index

as the standard measure for life expectancy, literacy, education and standards of living applied

across 58 host countries. Contrary to the earlier, more negative research findings, this study finds

significant evidence that CDM project development can contribute to SD efforts in a given host coun-

try should all CERs be realized. These results lend support to CDM as an effective mechanism contri-

buting to global sustainability.

In spite of the growing knowledge on the topic, the High-Level Panel of the CDM Policy Dialogue in

2012 concluded that ‘it is not possible to reach a definitive conclusion on the Sustainable Develop-

ment impacts of the CDM to date, given the insufficiency of objective data’ (Dialogue 2012). The Pan-

el was set up in 2011 by the Executive Secretary of UNFCCC, Christiane Figueres, and the Chair of the

CDM Executive Board to independently make recommendations on how to position CDM in response

to future challenges and opportunities and ensure the effectiveness of CDM in contributing to future

global climate mitigation. The conclusion on the CDM’s contribution to SD is based on a wide-ranging

research program and extensive stakeholder consultations. Insights are that stakeholders hold diver-

gent views, on whether or not the CDM has assisted host countries to achieve SD.

Many stakeholders believe that CDM has been successful, which is supported by research findings as

described above (UNFCCC 2012a; He, Huang et al. 2014). Other stakeholders hold the position that

the CDM has not contributed significantly to SD for a number of reasons: the CDM has had negative

impacts in some cases (TERI 2012) and is associated with human rights violations (Schade and Ober-

gassel 2014). Some stakeholders take the view that host countries lack the capacity to make effective


58

SD assessments. The responsibility to govern the CDM’s contribution to SD is delegated to the nation-

al level but without a common international definition of SD (Olsen and Fenhann 2008) and with a

lack of strong SD approaches at host country level this has led to a lowering of standards and the im-

pacts for SD being compromised. A rich literature explores these issues and is reviewed in more detail

below.

3.2.2 Governance of the CDM’s contribution to SD

The literature on governance of the CDMs contribution to SD falls into two categories focusing on 1)

the role of host country DNA practices for approval of CDM projects and 2) the role of market players

and global rules.

3.2.2.1 Host country DNA practices for approval of CDM projects

Three categories of issues are explored in the literature regarding the role of DNA practices for gover-

nance of the CDM’s contribution to SD at national level: 1) The host country policy and institutional

framework (Ganapati and Liu 2009; Rindefjall, Lund et al. 2011; Buhr, Thorn et al. 2012; Koakutsu,

Tamura et al. 2012); 2) Approaches to define national SD criteria and processes for issuing Letters of

Approval (LoA) (Olsen and Fenhann 2008; Bumpus and Cole 2010; TERI 2012; Tewari 2012) and; 3)

Technicalities related to DNA capacity and how they operate in practice (UNFCCC 2014a).

The role of policy and institutional frameworks for DNAs

Host countries’ institutional and policy frameworks is argued to be an overlooked issue, not suffi-

ciently understood compared to governance from above at the global level (Ganapati and Liu 2009;

Buhr, Thorn et al. 2012). Theoretically, institutional perspectives are applied to understand the role

of rules and regulations at national level, how norms and values in social contexts determine DNA

practices and how international guidelines are open to interpretation by host countries. Empirically,

the role of host country policy and institutional frameworks are explored in a number of case studies

from China (Buhr, Thorn et al. 2012), India (Ganapati and Liu 2009), Chile (Rindefjall, Lund et al.

2011), Latin American (Figueres 2004), Asian (Koakutsu, Tamura et al. 2012) and African countries

(Disch 2010; Karakosta, Marinakis et al. 2012). For instance, China’s DNA is found to be relatively

more powerful than the Indian DNA (Ganapati and Liu 2009).

China’s DNA is hosted by the National Development and Reform Commission (NDRC) set up in 2003

based on two energy and economic commissions and has played a key role in implementing energy

saving measures. Climate change has never been a stand-alone-issue in China’s policy agenda, but is

closely linked with other problems such as energy consumption, economic growth and environmen-

tal protection(Koakutsu, Tamura et al. 2012). This policy approach is reflected in China’s regulatory

requirements to CDM projects, which do not specify any specific SD criteria. Rather, the approach

consists of policy guidelines, three priority areas for CDM projects to contribute to a low carbon tran-

sition (energy efficiency, renewable energy and methane recovery and use), differentiated tax rates

based on project types (2% for priority projects, 30% for N2O projects and 65% for HFC and PFC

projects), price guidance with a floor price for CERs and a 49/51 eligibility rule favouring Chinese

ownership of projects (Buhr, Thorn et al. 2012).

In India, the DNA is hosted by Ministry of Environment and Forests, which does not hold a powerful

position in the Government of India compared to the NDRC in China. India has a National Action Plan

for Climate Change since 2009, which sets out eight missions for climate change and Sustainable

Development targeted at two issues: long term energy security through renewable energy/energy

efficiency and reducing GHG emissions. The DNA follows a common approach to CDM governance

based on a project-by-project assessment according to a checklist of SD criteria known as economic,

social, environmental and technological well-being. The SD criteria are described as broad and en-


59

compassing, and the Indian approach is seen to focus more on promoting CDM investments than on

safeguarding its contribution to Sustainable Development (Rindefjall, Lund et al. 2011).

In Chile, the concern for Sustainable Development is a recent phenomenon and the only procedural

rules for CDM approval is the Environmental Impact Assessment (EIA); no explicit SD criteria exist

(Rindefjall, Lund et al. 2011). The DNA is hosted by a national environmental commission, known as

CONAMA. Operational activities are delegated to an inter-ministerial committee. As Chile has been

successful to attract CDM projects, the lack of SD criteria reflects that the ‘race to the bottom’ is not

necessarily a structurally determined outcome, but a deliberate choice to prioritize economic devel-

opment above sustainability. For other Latin American countries, an early study argued that most

countries do not have a strong approach to achieve SD outcomes (Figueres 2004). DNAs are typically

not integrated into the mainstream framework for development planning and the checklist approach

to a project-by-project approval of projects is not instrumental to support a national or sectoral transi-

tion to low carbon development.

A general finding across the case studies is that national policy and institutional frameworks for

DNAs matter greatly for their capacity to steer the CDM’s contribution to national development goals.

However, what is seen as nationally appropriate differs widely, both in terms of how the CDM should

function and the national priorities it should support.

Approaches to define national SD criteria and processes for issuing Letters of Approval

Knowledge about actual approaches to define national SD criteria and DNA procedures for approval

of projects exists in a number of studies (Olsen and Fenhann 2008; Bumpus and Cole 2010; Koakut-

su, Tamura et al. 2012; TERI 2012; Tewari 2012); however, a comprehensive, consistent overview of

all host country DNAs with easy access to relevant information does not exist.

Based on Asian case studies, Koakutsu, Tamura et. al. (2012) identify three types of approaches to

promote SD through the CDM: 1) Assessment based on checklists and SD criteria; 2) A fund for Sus-

tainable Development based on taxes and levies differentiated by project types and 3) Certification of

projects according to an international or national standard for SD assessment such as the Gold Stan-

dard or the Crown Standard by the Thai Government. Comparing the three approaches with regard to

their advantages and disadvantages to ensure that SD outcomes are achieved, Koakutsu et. al. argue

that the certification approach is best, though it is so far only found in Thailand. Certification pro-

motes a higher standard for SD, internalizes the SD benefits in the price of CERs and incentivizes

project developers to consider the co-benefits of their emission reduction projects.

In a study entitled ‘Mapping of criteria set by DNAs to assess Sustainable Development benefits of

CDM projects’ by Tewari (2012), the checklist approach is found to be the most common followed by

a scoring approach based on SD indicators, which is often used in certification schemes. Data for the

study covers a sample of 50 countries including a survey with 10 DNAs responding, websites from 29

countries and information available in the literature. Out of the 50 countries, SD criteria for 20 coun-

tries could not be accessed, as some DNAs do not have a website, others do not web-host their SD

criteria or information was not accessible due to language issues or other technical problems. Based

on the data available, the study maps the SD criteria used for 30 countries and summarizes findings

in a list of the most commonly used SD criteria by DNAs in three categories: economic/technological,

environmental and social. The mapping shows that the concepts, categorization and prioritization of

SD criteria vary highly among countries, but most DNAs use the criteria as a reference for a project-

by-project approval of projects, with the exception of China and countries with no SD criteria availa-

ble.

The approval processes to issue a Letter of Approval (LoA) are compared for 7 countries by Olsen &

Fenhann (2008) and for 30 countries by Tewari (2012). Findings are that a number of other require-


60

ments than SD criteria are made by DNAs to issue a LoA. Usually the project is not expected to fulfill

all the SD criteria but only describe the ones that will be achieved. Commonly, the PDD is the basis

for the assessment against SD criteria and almost all countries have representation from key minis-

tries in an inter-ministerial committee to support the DNA in its decision-making. Most countries

promise speedy decision processes between 2-4 weeks for the voluntary option of issuing a Letter of

No Objection (LoNO) based on the Project Idea Note (PIN) and 1-2 months to issue the mandatory

LoA based on the PDD and various supporting documentation. The use of other eligibility criteria for

approval of CDM projects varies significantly between countries; it ranges from compliance with do-

mestic laws to requirements for an Environmental Impact Assessment (EIA) depending on the project

type.

DNAs, however, are increasingly becoming more pro-active and want to follow-up on SD claims dur-

ing project implementation. In the early days of the CDM no country required that the expected SD

benefits were monitored on an equal basis with GHG reductions to verify that they are real and mea-

surable (Olsen and Fenhann 2008). Yet this is currently changing with innovative approaches being

developed (Tewari 2012): the Peruvian DNA has introduced site visits and documentation for com-

munity acceptance, Rwanda requires updated SD checklists and documentation for impacts at verifi-

cation stage, India has introduced more detailed SD provisions and a 2% levy on large-scale projects,

Thailand, Philippines and Georgia have introduced a scoring of SD indicators and Kenya and Malay-

sia DNAs have identified priority sectors for approval.

Contrasting substantive issues such as definitions of SD based on country specific criteria and indica-

tors with procedural rules such as national requirements and practices for stakeholder involvement,

monitoring and verification of SD claims, Bumpus and Cole (2010) argue that strengthening of SD

impacts of CDM at the national and local level is about understanding and regulating power rela-

tions. Procedural rules are found to be more important than e.g. SD criteria for screening of PDDs. To

open for practical improvements of SD delivered at local level, transparent and clear information is

needed in the project implementation processes focusing on opening the ‘black box’ of how DNAs

operate to ensure that CDM contributes to Sustainable Development.

Technicalities related to DNA capacity and how they operate in practice

As part of a technical paper on possible changes to the CDM modalities and procedures (M&Ps), the

UNFCCC Secretariat has compiled a list of issues for further elaboration of the role of designated na-

tional authorities (UNFCCC 2014b). A number of Parties and stakeholders have suggested enhancing

the role of DNAs in the CDM. Areas of focus are generally in relation to governance, transparency and

technical aspects. The list of issues include: to clarify the role of DNAs, increase transparency of DNA

operations, allow DNAs to validate CDM activities, handling of complaints or stakeholder comments

and further elaborate the requirements for the content and form of LoAs. No decisions were made on

revised M&Ps at CMP 10 in Lima. The SBI negotiations on possible changes to M&Ps for the CDM will

continue at the June 2015 session in Bonn with an aim to conclude by CMP 11 in Paris.

3.2.2.2 The role of the market and global rules

Realising the weaknesses of host countries’ capacities to govern the CDM’s contribution to SD, i.e.

that most DNAs have very general SD criteria, that claims made by projects are typically not tho-

roughly assessed and that stakeholder consultations are often poorly documented, market players

and global rules offer complementary solutions to strengthen the CDM projects’ and programs’ SD

benefits.

The market demand for labeled credits is directly related to evidence suggesting ‘that host countries

are failing to ensure SD benefits of CDM projects’ (Parnphumeesup and Kerr 2011). The rationale for

sustainability labels is for the market to provide the solution to high-quality SD benefits of CDM


61

projects, assuming there will be a segment of buyers, which is big and strong enough to increase the

market share. The willingness to pay a premium price for labeled SD benefits is found to be in the

order of Euro 1/CER for documented SD benefits (Parnphumeesup and Kerr 2011). Parnphumeesup

and Kerr identify and classify two clusters of buyers and find that the carbon market can be divided

in two: the premium market and the normal market. The premium market is characterized by buyers,

who believe there is a need for the Gold Standard (GS) label to guarantee that SD benefits are deli-

vered and for the CDM to better contribute to SD. Typically, non-profit organizations and government

buyers are members of this segment. However, other studies find that labeled CDM activities only

slightly outperform comparable ordinary projects (Nussbaumer 2009) and there is not a detectable

potential SD surplus generated by the Gold Standard (Drupp 2010). Furthermore, sustainability la-

bels have never developed beyond a small niche of the compliance market and continue to attract

only a small share of the overall carbon finance available (Wood 2011).

Another solution to counter weaknesses in host countries’ governance of the CDM’s contribution to

SD is to strengthen rules at the global level. Torvanger, Shrivastava et al. (2013) believe a reformed

CDM will be part of a new climate agreement by 2020 and argue, there is a need to put a price on the

SD benefits to strengthen the delivery of outcomes. Facing challenges to simultaneously deliver the

two objectives of the CDM – offset production (OP) and Sustainable Development (SD) – e.g. due to

extra costs for MRV of SD benefits not benefitting the production of CERs, two tracks are proposed to

strengthen both objectives, separately. The primary requirement for an SD track is a common, inter-

national definition of SD and its criteria. The EB’s SD tool at UNFCCC level is found to be a first step in

this direction. SD impacts would have to be MRV’ed but due to the fact that quantifying and measur-

ing SD is difficult and costly, a more simple approach is proposed. The SD benefits could be ‘graded’

rather than given an exact number and the CDM Executive Board could develop methodologies for

arriving at these ‘grades’. The expected ‘grades’ for SD impacts would have to be validated and veri-

fied by Designated Operational Entities (DOEs) and the grades could then be linked to a price pre-

mium. To ensure demand for the SD track, it is suggested that the CMP introduce a binding quota for

the share of CERs to be certified, e.g. 50% of CERs purchased must be certified through the SD track.

Concerned about the negative social and human rights impacts of some CDM projects, Schade and

Obergassel (2014) argue that the UNFCCC could and should require all CDM projects to undergo

mandatory safeguards based on a human rights impact assessment (HRIA). Projects with negative

impacts should be ineligible for registration. In 2010 at COP 16 in Mexico, governments acknowl-

edged ‘that Parties should, in all climate change related actions, fully respect human rights’. Howev-

er, human rights are not mentioned anywhere in the CDM’s rules and procedures. Based on two case

studies of Bajo Agua´n in Honduras and the case of Olkaria in Kenya, the study finds that the CDM

projects feed into pre-existing conflicts related to land ownership. From both cases it follows that

host country governments are responsible for human rights infringements and at the same time re-

sponsible for ensuring a projects’ contribution to Sustainable Development and adequate stakeholder

consultations. The paper therefore argues that it is important to develop mandatory human rights

safeguards at the UNFCCC level.

3.2.3 Evaluation of the EB’s SD tool

An evaluation of the use of the tool was requested by the CMP in 2013 to assess whether the SD tool,

through its use, meets its purpose and achieves its expected impacts. The evaluation was carried out

in July 2014 with a survey being sent to 4,626 stakeholders (4,363 PPs, 167 DNAs and 96 investors)

with 137 responses (2.9% of which 100 were from PPs, 24 from DNAs and 13 from investors)

(UNFCCC 2014a). The evaluation recognizes that PPs are the primary users of the tool, while DNAs

and investors are potential users of the SD co-benefits (SDC) reports generated by the tool.

The survey was designed to evaluate stakeholders’ awareness of the availability of the tool, to test

their perception of whether the tool meets its objectives, and to assess their intentions regarding cur-


62

rent or future use. Key insights are that among PPs (100) 41% are aware of the tool, 64% agree the

tool highlights the SD co-benefits in a structured, consistent and comparable manner, 9% have ac-

cessed or used the tool, 39% plan to use it, 100% agree that the structure and criteria of the tool meet

their needs, 73% expect to use the SDC report to promote their project to investors at pre-registration

stage and 93% expect to use it for showcasing the co-benefits to increase the value of the CERs on the

market. Among DNAs (24) 71% are aware of the tool, 83% agree the tool highlights the SD co-

benefits in a structured, consistent and comparable manner and 92% plan to refer to the tool when

approving CDM projects at national level. Among investors (13) 77% agree that the SD co-benefits are

factored into investment decision-making and 69% agree that the SDC reports help with investment

decisions.

Interestingly, an analysis of the content of the SDC reports found that 9 out of 13 PPs were willing to

have claims in their SDC reports verified by a third party, the PPs considered the SD tool applicable to

both projects and programs of activities covering a variety of project types, and the structure of the

tool was considered to enable aggregating information across projects.

In conclusion, the SD tool is found to meet its objective as a voluntary measure to highlight the co-

benefits of CDM activities, while maintaining the prerogative of Parties to define their national Sus-

tainable Development criteria.

3.3 Interview perspectives, analysis and comparison of the needs and difficul-

ties to use the EB’s SD tool

Complementing the broad UNFCCC evaluation send to 4,363 stakeholders this study goes into details

through eight qualitative interviews to explore country and project developer experiences with SD

assessment of CDM projects, concrete experience with use of the EB’s SD tool and how this expe-

rience can be relevant beyond CDM for other mitigation mechanisms and national Sustainable Devel-

opment goals.

3.3.1 Overview of interviews

The eight interviews represent a diversity of perspectives and fall in two groups; 1) host country

DNAs from Asia, Latin America and Africa and 2) project developers’ and a government buyer pers-

pective from Sweden. Among the four host country DNA perspectives, Brazil and China represent

large sized countries with a high level of CDM experience and domestic capacity to approve a CDM

project’s contribution to national Sustainable Development priorities. The Uganda and Cambodia

DNAs represent respectively a medium sized and a small sized country with medium and little expe-

rience in approval of CDM projects. Cambodia has requested technical assistance from the UNFCCC

Secretariat to monitor the SD benefits of CDM projects and China is the only of the four countries,

where the EB SD tool has been used by project developers.

Among the three project developers Enaex from Chile has applied the EB SD tool to a CDM project in

the chemical industry titled ‘Catalytic N20 destruction’, a project which has been running for three

years. The South Pole has applied the SD tool to a multi-country PoA in Africa for water purification

and Green Development from Norway has experience from a multi-country PoA for energy efficient

cooking stoves also in Africa. The perspective from Sweden is included to share experience with use

of the EB SD tool by a government buyer that politically prioritizes CERs from projects that are docu-

mented to have a high contribution to Sustainable Development benefits and no negative impacts. An

overview of the interviews is presented for comparison of perspectives in Table 9 below.


63

Table 9: Overview of interviews regarding usability of the EB SD tool

Uganda

(DNA)

China (DNA) Cambodia

(DNA)

Brazil (DNA) Sweden

(buyer)

Sweden

(buyer)

Green De-

velopment,

Norway (PP)

Enaex, Chile

(PP)

South Pole,

Switzerland

(PP)

Experience with SD assessment of CDM projects

What SD

criteria are

used?

Checklist No SD crite-

ria

Checklist Checklist Prioritisation

of EE, RE &

biogas/

methane

projects.

Prioritization

of EE, RE &

biogas/

methane

projects. No

SD criteria

DNV-GL

Global Car-

bon Devel-

opment

Benefits

Standard

(draft)

SD criteria

defined by

the company

Host country

SD criteria

How is the

LoA deci-

sion/SD

assess-

ment

made?

Ranking of

SD crite-

ria/Inter-

ministerial

committee

Compliance

with eligibil-

ity crite-

ria/Inter-

ministerial

committee

Scor-

ing/Inter-

ministerial

committee

Assess-

ment/Inter-

ministerial

committee

Comprehen-

sive Due

diligence

including

site visit,

supported

by modified

version of

draft EB

CDM SD tool

incl. safe-

guards and

LSC proce-

dures

Due dili-

gence based

on draft EB

CDM SD tool

incl. safe-

guards and

LSC proce-

dures

Methodolo-

gies are de-

veloped for

quantifying

development

benefits

Use of EB SD

tool and LoA

obtained

from DNA

PoA-DD the

basis of LoA


64

Uganda

(DNA)


(DNA)

Brazil (DNA) Sweden

(buyer)

Sweden

(buyer)

Green De-

velopment,

Norway (PP)

Enaex, Chile

(PP)

South Pole,

Switzerland

(PP)

Is there

interest

and capaci-

ty to moni-

tor and

verify SD

claims?

Yes, but lit-

tle capacity

No interest N/D Yes, sector

ministries

follow up,

not DNA

Yes, mod-

ified version

of SD tool is

sent to PPs

and SDC

report as

part of fol-

low-up, in-

cluding be-

fore follow-

up site vis-

its.

Yes, SD tool

is sent to

PPs and SDC

report for

site visits &

follow-up

Yes, SD ben-

efits to be

certified and

sold in their

own value or

internalized

in the CER

price

Yes, the

company

will follow

up on SD

impacts

The compa-

ny is client

driven, so

only if

clients de-

mand fol-

low-up and

will pay it

Is there a

need for

safeguards

against

negative

impacts?

Guidance

needed

Yes, other

agencies

take care of

this

N/D No, safe-

guards and

LSC are part

of EIA

Yes,importa

nt focus to

avoid nega-

tive impacts

Yes, focus is

to avoid

negative

impacts

No, too cost-

ly. LSC do

not add val-

ue

No, we use

ISO certifica-

tion 1909 for

quality as-

surance

N/D

Are there

additional

require-

ments for

approval?

EIA is re-

quired ex-

cept for

clean tech-

nologies

EIA, oral

presenta-

tion, tax,

49/51 rule,

licenses,

ERPA

EIA is re-

quired for

some

projects

EIA, valida-

tion report,

LSC proce-

dures. Ex-

ample of LoA

withdrawn

Comprehen-

sive Due

Diligence

including

observations

from site

visit.

Draft SD tool

is used to

structure the

due dili-

gence /SD

assessment

DNAs should

not be in-

volved due

to low ca-

pacity &

risks of cor-

ruption

DNA Chile

does not

have SD

criteria and

do not follow

up after LoA

LSC were

important to

DNA


65

Uganda

(DNA)


(DNA)

Brazil (DNA) Sweden

(buyer)

Sweden

(buyer)

Green De-

velopment,

Norway (PP)

Enaex, Chile

(PP)

South Pole,

Switzerland

(PP)

Experience with use of the SD tool

Has the SD

tool been

used?

No No, there is

no dialogue

between PPs

using the

tool and DNA

China

No No Yes, a mod-

ified draft EB

SD tool is

used incl.

safeguards

and LSC

guidance

Yes, the

draft EB SD

tool is used

incl. safe-

guards and

LSC guid-

ance

Yes, SDC

report sub-

mitted to

UNFCCC

Yes, SDC

report sub-

mitted to

UNFCCC

Yes, SDC

report sub-

mitted to

UNFCCC

What is the

general

view of the

tool?

Very useful Not useful to

China

Useful to

PPs

Not useful to

Brazil, only

to PPs

Very useful,

but strong

weakness in

approved

version

Very useful,

but strong

weaknesses

Very useful,

but too sim-

ple. Quanti-

fication is

needed

Very useful

and clear

Useful, it

goes into a

lot of detail

without

quantifica-

tion

Is the tool a

simplifica-

tion or ad-

ditional

effort?

Simplifica-

tion

N/D N/D Simplifica-

tion

Simplifica-

tion

Simplifica-

tion

Simplifica-

tion

Simplifica-

tion

Simplifica-

tion

Options to

expand use

of the tool

SDC report

useful for

local stake-

holder con-

sultations

Could be

useful in

China‖s na-

tional car-

bon trading

system

Strengthen

LSC proce-

dures

No role for

the tool in

relation to

national SD

criteria

Address

risks of neg-

ative im-

pacts, LSC &

safeguards.

Address

risks of neg-

ative im-

pacts, LSC &

safeguards

for HRs. SDC

report to be

published

with valida-

tion and

Extend use

of the tool

for standar-

dization

across coun-

tries

SD tool use-

ful for other

projects in

the compa-

ny, not only

CDM

Quantifica-

tion based

on UNFCCC

guidance,

require-

ments for

validation

and verifica-

tion of SD

claims


66

Uganda

(DNA)


(DNA)

Brazil (DNA) Sweden

(buyer)

Sweden

(buyer)

Green De-

velopment,

Norway (PP)

Enaex, Chile

(PP)

South Pole,

Switzerland

(PP)

verification

reports

Should the

tool be

mandatory

for PPs to

use?

Yes, this is

being consi-

dered for

issuance of

LoA

No, volunta-

ry only

N/D No, volunta-

ry only

It could pro-

vide trans-

parency to

the market

Yes, it gives

transparen-

cy to the

market

No, not all

projects

need it

Yes, it

makes sense

to MRV SD

benefits

No, we only

responded

to a client

request

Relevance of the SD tool beyond CDM

Is there a

need for

quantifica-

tion and

monetiza-

tion of SD

co-

benefits?

Yes No, PPs

should not

do more

work

Maybe, but

it requires

more effort

Yes, this is

tough. Coun-

tries must

do it, a study

is ongoing

Qualitative

assessment

is sufficient,

so far

No, qualita-

tive assess-

ment is suf-

ficient, so

far

Yes! Yes, it would

be useful to

get a holistic

perspective

on the

project

Yes

Can the

tool en-

hance do-

mestic di-

alogues on

SD?

Yes, SD cri-

teria reflect

macro-

economic

priorities

No N/D N/D Yes, the tool

can give

support to

domestic

dialogues

and thereby

enhance the

credibility of

CDM

Projects

Yes, the tool

can enhance

the credibili-

ty of CDM

projects

Yes, the tool

can streng-

then domes-

tic SD as-

sessment

Yes, it would

be useful for

DNA if they

gave us a

uniform re-

port format

Yes, it could

greatly en-

hance the

value of mi-

tigation-

actions


67

Uganda

(DNA)


(DNA)

Brazil (DNA) Sweden

(buyer)

Sweden

(buyer)

Green De-

velopment,

Norway (PP)

Enaex, Chile

(PP)

South Pole,

Switzerland

(PP)

Can the

tool assist

to harmon-

ize SD ef-

forts across

mitigation

mechan-

isms?

Yes, ex-

panded to a

NMM/FVA

and NAMAs

for harmo-

nized report-

ing

Yes Yes, SD as-

sessment

across me-

chanisms

should be

similar

N/D Yes, the tool

could poten-

tially har-

monize SD

assessment

across coun-

tries for

transparen-

cy

Yes, the tool

could har-

monize SD

assessment

across coun-

tries for

transparen-

cy

Yes, we need

a common

standard

across miti-

gation me-

chanisms

Yes, any tool

to harmon-

ize across

mechanisms

would be

useful

Yes, the SD

tool frame-

work is

broad

enough to

compare

across me-

chanisms

Is there an

interest in

certifica-

tion of SD

co-

benefits?

Yes, Gov. of

Uganda

should do

certificates

based on an

international

standard

No Yes, a na-

tional stan-

dard would

be best

N/D Yes, given

credibility

and suffi-

cient quality

of service.

Yes, if good

enough. The

Gold Stan-

dard is a

commercial

tool to en-

hance price

Yes, a global

standard

incl. quanti-

fication of

development

benefits

Yes, third

party valida-

tion and

verification

can show SD

efforts to the

world in a

valid way

Yes, interest

is there from

the market

(buyers) and

from gov-

ernment

(NAMAs)

Can human

rights be

streng-

thened

through the

SD tool?

Yes N/D Yes No, HRs is-

sues are

taken care of

nationally

Yes. Yes, but not

through

DNAs

Yes, but this

is political.

Projects

should not

document

compliance

with HRs

The compa-

ny uses the

―UN Global

Compact‖ to

document

respect for

HRs

Yes, safe-

guards for

HRs would

be useful

but not de-

manded by

clients


68

3.3.2 Comparison of host country and user experiences with SD appraisal

The interview questionnaire structures the comparative analysis of host countries and other users’

needs and difficulties to use the EB’s SD tool as shown in Table 2. This section presents a synthesis of

our findings in context of insights from the literature review to identify more general challenges and

opportunities for use of the EB SD tool of relevance beyond the concrete survey results.

3.3.2.1 Host country DNA experiences

Except China the other three countries use a checklist of SD criteria as the basis for approval of CDM

projects on a project-by-project basis. The SD criteria all relate to three or four dimensions of Sustain-

able Development; environment, social and economic, sometimes technology as a separate dimen-

sion or part of the economic dimension. However, the exact concepts and priorities for SD vary

among countries reflecting different national priorities and processes of assessment. Cambodia in-

cludes ‘demining’ as an SD goal due to problems with old landmines. They score impacts as positive,

negative or neutral and ask project developers to take action, if there are too many negative impacts.

Uganda uses ranking of SD criteria according to national SD priorities and Brazil makes an assess-

ment according to sector goals for SD. One eligibility criterion is similar across all countries, namely

the Environmental Impact Assessment (EIA) being a requirement for almost all CDM projects with a

few exceptions such as for clean technologies. Other requirements vary widely, e.g. whether an oral

presentation is needed as in China, documentation needs for compliance with national laws and li-

censes, the importance and procedures of local stakeholder consultations as part of the EIA or specif-

ic to CDM, whether the validation report is required before the LoA as in Brazil and if procedures exist

for withdrawal of the LoA in case of community or stakeholder complaints during implementation as

in Brazil and under consideration in Uganda.

The decision to issue a LoA is made by an inter-ministerial committee in all countries that involves

representatives from key ministries. DNAs are hosted by Ministries of Environment in Uganda and

Cambodia, by the Ministry of Science, Technology and Innovation in Brazil and by the National De-

velopment and Reform Commission (NDRC) in China. From the literature review it is known that the

institutional set-up plays a key role for the integration of the CDM and other mitigation actions into

development planning. While SD criteria in principle reflect national SD goals and priorities, the

project-by-project approach used by most DNAs, except China, is not considered strong in terms of

mainstreaming low carbon development and sustainability concerns into sectoral and national plan-

ning. The Chinese approach is considered more efficient than a project-by-project screening, as prior-

ity areas for CDM projects in energy efficiency, renewable energy and methane recovery saves trans-

action costs for SD screening and ensures CDM’s contribution to national priorities. However, this

approach does not ensure a strong contribution to SD at local and community levels, where proce-

dural issues such as stakeholder involvement, monitoring and evaluation and safeguards against

negative impacts, are known to be of high importance (Bumpus and Cole 2010).

While there is interest to monitor and verify SD claims in Uganda and both an interest and capacity in

Brazil through sector ministries, there is no interest in adding extra procedures in China. Regarding

safeguards against negative impacts, Uganda would like more guidance and Cambodia is the only

country and DNA so far, who has responded to a call from the UNFCCC Secretariat in May 2014 to

request technical assistance for development of guidelines for local stakeholder consultations and

assistance with monitoring of SD benefits. The country perspectives reveal a division between Brazil

and China on the one hand, being large developing countries and Uganda and Cambodia, being me-

dium and small sized countries on the other hand. Big countries with capacity refer to domestic insti-

tutions and procedures already being in place and see no need for additional guidance or rules from

international level, while the small and medium sized countries are more interested and open to

guidance offered to build capacity and strengthen national procedures. In the literature, innovative

approaches are identified in a number of countries such as Peru, Rwanda, Thailand, Philippines,


69

Georgia, Kenya and Malaysia introducing new procedures to score SD impacts, follow-up on monitor-

ing of SD impacts and identifying priority areas for approval (Tewari 2012). However, there is little

evidence from the response to the Secretariats’ offer for technical assistance to indicate that these

issues are considered a priority to host countries more generally.

3.3.2.2 Project developer and buyer experiences

Experience from project developers and a buyer perspective on host countries’ abilities to set national

standards and steer the CDM towards high benefits for SD is very negative in one case of the experts

interviewed. In the three other cases host country performance generally falls short of what is ex-

pected in the market regarding transparency, consistency in SD assessment across projects, easy

access to information and follow-up to demonstrate that claims are realized. As a consequence, stan-

dards and requirements for sustainability assessment are developed by market players in two cases:

1) from a government buyer in Sweden and 2) a project developer in Norway, both aiming to set

higher standards beyond what is required by the host country DNAs and to avoid negative impacts.

The two proposals, however, are very different in approach focusing respectively on; 1) qualitative

and procedural aspects of SD assessment in the case of Sweden to avoid negative impacts and on 2)

quantitative SD assessment in the case of a Norwegian project developer concerned with demonstrat-

ing development benefits. The latter proposal is not interested in additional transaction costs and

responsibilities to involve local stakeholders or document compliance with safeguards. The Swedish

government buyer applies its own due diligence assessment and has introduced a modified version of

the draft EB SD tool including safeguards for human rights, good labour practices, environmental

protection, anti-corruption and land rights to avoid negative impacts and prioritising participation of

local stakeholders and communities. As a government buyer with a high capacity, they are able to

conduct their own site visits using the modified draft EB SD tool questionnaire as a basis for due dili-

gence assessment and they have a program to follow-up during implementation that projects perform

in line with what is expected.

The Norwegian project developer has developed a draft ‘Global Carbon Development Benefits Stan-

dard’ for quantification of development benefits in cooperation with DNV-GL, one of the largest DOEs

in the market. This reflects a general trend and interest in the market to go beyond qualitative as-

sessments of SD impacts and have solid methods for quantified SD assessment. Validation and verifi-

cation by a Third Party is prerequisite for SD benefits to be priced in the carbon market, either sepa-

rately as a value in itself or internalized into the price of CERs attracting a premium price. The expe-

riences of the two other project participants is that SD assessment in one case is based on SD criteria

defined by the company due to a lack of explicit SD criteria by the host country in Chile and in the

other case based on host country SD criteria, applying the EB SD tool for transparency, as the client

demanded it.

Regarding interest and capacity to monitor and verify that SD claims are met, the interviewed project

developers all agree that this is desired (in one case, only if the client demands it and will pay for it).

Responses are more mixed regarding the need for Local Stakeholder Consultations (LSC) and safe-

guards. One project developer is negative arguing this is too costly and the way LSC is carried out

today with the project developer being responsible, the process does not add much value, as it can be

manipulated to give the result desired. Doing it thoroughly implies extra costs for little value added.

Contrary to this perspective, the Swedish government buyer sees these procedural aspects as more

important than quantitative information on SD benefits. They see no need for the extra efforts of

quantifying the benefits, as long as thorough, robust knowledge exists on what the benefits are quali-

tatively. In Chile, the project developer uses an ISO certification standard for quality assurance in-

cluding safeguards against negative impacts and does not see the need for additional requirements in

this area.


70

3.3.3 Concrete experience with use of the EB’s SD tool

3.3.3.1 Host country DNA experiences

None of the four DNAs interviewed have used the tool and China and Brazil do not find it useful to

their DNAs, only to PPs. This is no surprise, as the primary users of the tool are PPs, with DNAs and

investors being potential indirect users, e.g. through use of the information in the SDC reports. China

is the only DNA of the four interviewed where project developers have used the SD tool, but there has

been no dialogue between PPs and the DNA. In Brazil, the DNA sees no role for the tool to strengthen

national SD assessment. In spite of the tool not being used by DNAs directly, awareness of the tool is

fairly good with 71% of DNAs knowing the tool (UNFCCC 2014a). In China, the tool is considered to

be of interest outside of the CDM in context of the emerging national carbon trading system for a

strengthened approach to SD assessment.

Contrary to DNAs in China and Brazil (large countries), Uganda and Cambodia (medium and small

sized countries) do find that the tool is potentially very useful both to support DNA SD assessment

and particularly to PPs. Options to expand use of the tool in Uganda and Cambodia are to use the SDC

report as a basis for local stakeholder consultations and to strengthen LSC procedures. Uganda is

considering the tool to be mandatory for PPs as a requirement for issuance of the LoA. In China and

Brazil, there is no interest to make the tool mandatory, only voluntary. According to the UNFCCC sur-

vey, host country DNAs are generally positive towards the SD tool with 84% (of 24 DNAs) agreeing

that the tool highlights SD co-benefits in a structured, consistent and comparable way and 92%

planning to refer to the tool when approving CDM projects at national level.

3.3.3.2 Project developer and buyer experiences

All the project developers we interviewed have used the tool and find it very useful as a simple, stan-

dardized approach for qualitative declaration of the SD co-benefits of CDM projects. The government

buyer from Sweden also finds the tool very useful, though with clear weaknesses as it does not ad-

dress the risks of negative impacts through safeguards, neither does it include requirements on local

stakeholder consultations and there are no provisions for monitoring, validation and verification of

the SDC reports. Two of the PPs suggest that the tool should be expanded to also quantify the SD ben-

efits according to standardized methods, applicable across countries following UNFCCC guidance

including requirements for MRV of SD claims made. One of the PPs sees opportunities to expand use

of the tool for quality assurance to other company projects outside the CDM.

PPs are divided on the question whether the tool should be mandatory to use. The buyer argues that

the tool gives transparency to the market and developing a tool which could be accepted as mandato-

ry to use would add credibility to the CDM as a mechanism. One of the PPs thinks it makes sense to

make it mandatory including MRV of the co-benefits. Two of the PPs argue that it should not be made

mandatory, as not all projects need it and it is only worth the extra costs if the client will pay for it.

3.3.4 How SD tool experience can be relevant beyond CDM

3.3.4.1 Host country DNA perspectives

Quantification and monetization of SD co-benefits is considered a tough job that would require a big

extra effort by DNAs and PPs. Brazil finds there is a need for this at country level and is exploring how

it could be done in an ongoing study by the ministry. Uganda also finds a need for it, as numbers and

monetary values could make it more clear particularly to Ministry of Finance, how and how much

mitigation actions contribute to national development. Cambodia finds there may be a need for it but

is concerned about the extra efforts required. China does not see a need, as it would require PPs to do

more work.


71

Countries are divided on the issue whether the tool can enhance domestic dialogues on SD and assist

to harmonize SD efforts across mechanisms. In Uganda, the SD criteria reflect macro-economic priori-

ties and the tool is welcomed to assist harmonizing reporting formats for new mechanisms such as

Nationally Appropriate Mitigation Actions (NAMAs), New Market Mechanisms (NMMs), non-market

approaches, Reduced Emissions from Deforestation and Degradation (REDD+) and Intended Nation-

ally Determined Contributions (INDCs) that all aim to contribute to low carbon development. China

and Cambodia also see opportunities for the tool to harmonize SD assessment but China does not see

a role for the tool to enhance domestic dialogues on development priorities. Brazil and Cambodia

have not yet considered this issue.

Certification of SD-co-benefits is considered of interest to Uganda and Cambodia on the condition

that certificates are issued domestically according to a national standard informed by international

guidance. China has no interest in certification and Brazil has not considered this. In literature on

national approaches to SD assessment, the certification approach is argued to be a stronger approach

than checklists to promote a high contribution to SD through internalizing the value of SD benefits in

the price of CERs (Koakutsu, Tamura et al. 2012) or through a separate price mechanism for SD bene-

fits (Torvanger, Shrivastava et al. 2013). An international standard for SD criteria such as the EB SD

tool could be a first step towards a new mechanism to value SD benefits. SD certificates could be is-

sued by a market player such as the Gold Standard, at international level by the UNFCCC Secretariat

or by domestic authorities such as DNAs in line with national SD priorities.

Regarding compliance with human rights in climate change actions, Uganda and Cambodia agree

that a human rights based approach can be strengthened through the SD tool. China has not consi-

dered the issue and Brazil does not see a need for this, as human rights issues are taken care of na-

tionally by other institutions.

3.3.4.2 Project developer and buyer perspectives

Except for the Swedish buyer perspective, there is a clear agreement among PPs that quantification

and monetization of SD co-benefits responds to emerging demands in the carbon market.

All the PPs and the buyer agree that there are important opportunities to strengthen domestic SD di-

alogues and harmonize efforts across mechanisms through use of the SD tool. It would be very useful

and a significant simplification to PPs to have a uniform SD reporting format across projects and

countries. Use of the tool can enhance the value of mitigation actions, strengthen transparency on SD

impacts and increase credibility of the mechanism as a whole. Expanding use of the tool to new miti-

gation mechanisms is welcomed and the framework is believed to be broad enough to compare

across different types of actions.

Certification based on the tool is of interest to all CDM project participants, on the condition the stan-

dard is good enough to also address e.g. negative impacts and not only focus on pricing of benefits. A

global standard is preferred by one PP to include quantification of development benefits. Third party

validation and verification is regarded as a prerequisite to demonstrate the credibility of claims made,

that should be available for the world to see it. Interest in certification is found both in the market

among clients and from governments that want to know SD benefits of mitigation actions to co-

finance NAMAs.

Integrating a human rights approach to CDM projects is generally welcomed but with some reserva-

tions. From a company perspective already using the UN Global compact, new and additional re-

quirements may add little extra value. One PP sees this as a very political issue and argues that pro-

jects should not be obliged to document compliance with human rights. Safeguards can be useful but

are typically not demanded by clients.


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3.4 Summary

In this chapter, we analyzed the literature and experiences with host countries, project proponents

and a buyer’s perspective on the usability of the EB’s SD tool. This section summarizes the findings

and lessons learned for DNAs and other stakeholders in using the tool for SD impact assessment of

CDM projects and beyond, exploring synergies with sustainability assessment for broader national

development and climate policy priorities.

In summary, the evaluation of the CDM SD tool, carried out by the UNFCCC Secretariat in July 2014

based on a survey to 4,363 stakeholders, is very positive and finds that the tool as a voluntary meas-

ure meets its objective to highlight the co-benefits of CDM projects, while maintaining Parties’ pre-

rogative to decide national priorities for Sustainable Development. Complementing these findings,

semi-structured interviews with four host country DNAs and four user perspectives were carried out

in this study and contribute with a rich material to understand the diversity of thinking, needs, chal-

lenges and opportunities for use of the EB’s SD tool. In context of the literature review on governance

of the CDM to contribute to Sustainable Development, the analysis leads to the following conclusions.

3.4.1 Experience with host country SD assessment and use of the EB SD tool

The SD tool is not directly useful to DNAs, as it is meant for PPs to use. China is the only DNA of the

four approval bodies interviewed where project developers have used the tool, but with no dialogue

between PPs and the DNA. Uganda and Cambodia, two medium and small seized countries, see sev-

eral options to expand use of the tool to strengthen their capacity for SD assessment at national level,

e.g. by using the Sustainable Development report (SDC) from the tool as a basis for local stakeholder

consultations and by making the tool mandatory for PPs to use as a condition for issuance of the LoA.

China and Brazil, on the other hand, are two big countries with high institutional capacity and do not

see any direct role to play for the tool in relation to national SD assessment and approval.

More generally, the UNFCCC evaluation of July 2014 found that most DNAs are aware of the tool

(71%), positive towards the tool highlighting SD co-benefits in a structured and comparable way

(84%) and plan to refer to the tool, when conducting SD assessment for approval of CDM projects at

national level (92%). However, the evaluation and interviews were conducted, respectively 4 months

and 9 months after the SD tool was launched in April 2014, so it is still early days for countries and

users to learn, what the tool is and can be used for.

In relation to host country DNA practices for SD appraisal and approval of CDM projects, the tool is

similar to the checklist approach of most countries (e.g. Uganda, Cambodia and Brazil), which cate-

gorize co-benefits into three (sometimes four) dimensions of Sustainable Development: econom-

ic/technological, social and environmental. By providing a taxonomy of Sustainable Development

benefits with three dimensions, 12 criteria and 70 indicators as a menu for structuring reporting on

expected SD impacts of projects, the tool does not give an international definition of what SD means,

but facilitates a structured comparison that respects Parties’ prerogative to decide on national priori-

ties.

Monitoring and verification of SD claims is not practiced systematically by DNAs, though Brazil and

Uganda have experience with community complaints related to projects under implementation. In

one case Brazil has withdrawn the LoA, though there are no established procedures for how to do it

and what the implications should be. From the interviews and in the literature on DNA experiences

with SD assessment (Tewari 2012), there is a clear, emerging interest to follow-up that SD claims are

met, though some DNAs do not wish to add extra work and requirements to PPs (e.g. China) and are

concerned about the extra efforts required (e.g. Cambodia). With the concept note on ‘Voluntary

monitoring of Sustainable Development co-benefits’ discussed at the 82nd Executive Board meeting

16-20 February 2015 (UNFCCC 2015), new opportunities are considered to use the tool as a basis for


73

monitoring, validation and verification of SD claims in a standardized way that supports DNA prac-

tices.

Regarding safeguards against negative impacts of CDM projects, the draft SD tool had provisions for

safeguards; however, the current tool is silent on this and does not address e.g. issues of compliance

with human rights. Uganda would like to have more guidance in this respect and Cambodia has re-

quested technical assistance from the UNFCCC Secretariat to assist with country specific guidance for

monitoring of SD impacts and guidelines for local stakeholder consultations. China and Brazil refer to

national institutions that already deal with such issues and do not see an interest in additional sup-

port from the international level. In the context of a human rights based approach to operationalize

the COP decision 1/CP.16 that human rights must be respected in all climate related actions, there is

both a mandate and a need to address safeguards for human rights at the UNFCCC level. As cases of

human rights violations indicate that host country governments are responsible for human rights

infringements, there is a need to introduce mandatory human rights safeguards in the governance of

CDM at global level (Schade and Obergassel 2014).

From the perspective of users of the SD tool, all interviewees find it very useful and simple as a stan-

dardized, qualitative approach to SD assessment. However, a number of weaknesses are identified for

the tool to meet user needs, particularly avoiding negative impacts and attracting a premium price for

carbon credits with high Sustainable Development benefits. The tool does not include safeguards to

mitigate risks of negative impacts, it does not include provisions for stakeholder consultations to en-

hance local SD benefits, it does not provide modalities for monitoring, validation and verification and

it only makes a qualitative, not a quantitative assessment of benefits.

Comparing user needs with host country DNA practices for SD assessment, national standards fall

short of meeting expectations in the premium market. Long-known problems of disincentives for

countries to set high SD standards, known as a ‘race-to-the-bottom’ (Sutter and Parreño 2007) for low

SD requirements to better attract investments, are still at play and Sustainable Development is not

priced in the compliance market, only through voluntary certification schemes. Furthermore, the

capacities and priorities of host countries differ widely and the role of DNAs in governing the CDM’s

contribution to SD is not described in any detail internationally, though a range of proposals to

strengthen the role of DNAs is under consideration as part of an ongoing review of CDM modalities

and procedures (UNFCCC 2014b). Against these shortcomings, a project developer and government

buyer have developed their own procedures and standards, respectively a draft ‘Global Carbon De-

velopment Benefits Standard’ for quantification of development benefits and due diligence safe-

guards against negative impacts based on the draft CDM SD tool. Though the SD tool is welcomed in

the carbon market, PPs are divided whether the tool should be mandatory to use. Some argue it

would add credibility to the mechanism as a whole and others argue not all projects need it and it

would add extra costs for project development.


74

4 Synthesizing needs and offers

The second chapter of this report covered the assessment and comparison of the SD provisions of

selected flexible mechanisms and multilateral standards. The third chapter consisted of a literature

review and interviews with selected host country governments, project developers and a buyer pers-

pective on the usability of the EB’s SD tool.

In this chapter, we recall and synthesize findings of the previous chapters. We discuss pros and cons

of the EB’s SD tool in comparison to other mechanisms (analyzed in chapter 2) and 'needs' voiced by

practitioners (determined in chapter 3).

This analysis serves to arrive at structured recommendations for further developing the SD tool, di-

vided into more easily implementable amendments, and those that would transform the SD tool into

a sound assessment tool for SD effects.




4.1 Methodology

This report synthesizes the outcomes of the preceding chapters, with an aim to discuss and propose

politically feasible options for further development of the EB’s SD tool. We draw up recommendations

on how to enhance the tool and on how to strengthen SD assessment of CDM projects in general, with

a view to impact ongoing and future SD considerations even beyond CDM, on a global level.

4.1.1 Synthesis of chapters 2 and 3

The first two work packages approached the assessment of Sustainable Development impacts from

two perspectives:

▸ Work package 1 analyzed the current status of SD assessment approaches, within, but also out-

side of the CDM context.

Outcomes of this work package therefore represent what is currently 'offered' in terms of SD as-

sessment practice.

▸ Work package 2 surveyed experiences on a national level with assessing Sustainable Develop-

ment. By interviewing representatives of host country DNAs as well as practitioners and review-

ing existing literature, we developed knowledge on what is 'needed' by practitioners, as well as

on practical issues in applying the tool.

Comparing these two angles yields insights on shortfalls between the 'offers' and the 'needs' in do-

mestic practice. We therefore develop a matrix that juxtaposes findings from work chapter 2 and 3.

The 'needs' are presented in the left column reflecting enhanced criteria for SD assessment voiced by

the interviewees, cp. example matrix below. This table also serves to identify the positive and nega-

tive aspects of the EB’s SD tool.


75

Table 10: Structure of the comparative matrix

Criterion

CDM SD tool Mechanism 1 Mechanism 2 Mechanism 3

Criterion A ✗ ✔ ✔ ✔

Criterion B ✗ ✗ ✔ ✔

Criterion C ✗ ✔ ✔ ✔

Criterion D ✔ ✗ ✗ ✔

Criterion E ✗ ✗ ✗ ✗

4.1.2 Recommendations and feasibility of improvements

In a second step, we evaluate the feasibility to overcome the shortfalls identified. We discuss possible

ways to improve and enhance the tool, and to improve the consideration of SD in CDM in general.

The recommendations in this report discuss possible ways to improve / enhance the EB’s SD tool and

to improve the consideration of SD in CDM in general. The discussion draws upon the results of the

preceding work packages, the literature surveyed, the CDM EB’s recommendations to CMP10, the

discussion on the CDM modalities and procedures, and other relevant documents.

Our recommendation are divided into two consecutive levels:

▸ Level one lays out improvements.

Improvements to the SD tool we regard as relatively easy to install.

Recommendations we make here are likely to be within the frame of the current CMP / EB

mandate, e.g. inclusion of human rights into the CDM, or enhanced stakeholder consultation re-

quirements, which are already under consideration within the Board.

Other issues would go beyond the current discussion and would therefore need to be fuelled into

the negotiations on modalities and procedures (M&P) under UNFCCC. While this would go

beyond changes that can be made at the level of the Board, we still consider these as not funda-

mentally transformative for the SB tool. They are however, a prerequisite for farther-reaching

changes of the SD tool.

▸ Level two lays out enhancements.

These enhance the SD tool on a deeper level, adding a different quality to it.

Level 2 recommendations thus go one step further than those made at Level 1. They describe

more fundamental changes that would help to transform the voluntary paper tool into a global SD

assessment standard which would add monetary value to credits with rectified SD co-benefits.

Each recommendation will be complemented by a short paragraph analyzing the feasibility of the

improvement. This assessment is based on expert judgement, but points to specific references where

applicable.

In general, we regard level one improvements as unlikely to meet with massive political head winds,

especially since there seems to be a growing propensity towards more stringent SD assessment within

the CDM at the moment.

Deeper change also comes with greater difficulties in political feasibility. Level two recommendations

we therefore generally regard as harder to implement, but with a stronger impact if achieved.

We conclude our recommendations with an overview table, which allows us to view the entirety of

our recommendations at both levels at a glance.

The report finishes with an outlook beyond the CDM and the relevance of the issues discussed for the

wider climate mechanisms at national and internationally levels such as domestic emissions trading

schemes (ETS), New Market Mechanisms (NMM), a Framework for Various Approaches (FVA), Na-


76

tionally Appropriate Mitigation Actions (NAMAs) and Green Climate Fund (GCF) financing for mitiga-

tion actions.

4.2 Synthesis of the pros and cons of the EB CDM SD tool

In this chapter, we synthesize main findings of the previous two chapters. While chapter 2analyzed

what is 'offered' in terms of the assessment of Sd impacts by a number of mechanisms, chapter 3 de-

termined the 'needs' of practitioners when applying the CDM SD tool.

We compare these two angles within a matrix (section 1.1.1). The matrix is set up as follows:

▸ The assessment criteria (first column) reflect the key 'needs' as voiced by the host country DNAs

and practitioners interviewed in the course of WP2. We juxtapose these with what is currently

available in the CDM SD tool, in comparison with other approaches within and outside the CDM,

as analyzed in WP1.

▸ The matrix simplifies the available information in order to provide quick and easy access to the

provided information.

A 'tick' signifies that a given mechanism features that criterion.

Bracketed 'ticks' signify that a feature is possible, but not explicitly included.

A 'cross' signifies that a given mechanism does not exhibit this feature.

For some mechanisms, certain indicators are not applicable (n/a).

In some cases, the information needed could not be simplified. In that case, we have included a

minimal amount of text.

The subsequent section (4.2.2) provides some more in-depth information in textual form. We analyze

the information provided through the matrix in order to identify shortcomings of the CDM SD tool. We

draw from both previous chapter, highlighting 'needs' voiced by interviewees, and indicating the

state of the art for each indicator, as 'offered' by other mechanisms.


77

4.2.1 Matrix comparing the ‘needs’ for CDM sustainability assessment against ‘offers’ by different flexible mechanisms

Table 11: Comparative matrix of needs and offers

Criteria/Needs CDM SD

tool

Social Car-

bon Me-

thodo-logy

CCB

Standards

CDM Gold

Standard

Crown

Standard

UN REDD

Programme

UNDP NA-

MA SD tool

ADB IFC

Indicators for SD

co-benefits ✔ ✔ ✔ ✔ ✔

Criteria but

no indica-

tors

✔ Safeguards Safeguards

Quantification ✗ ✗ Partly

quantitative ✗ ✗ ✗ ✔ ✗ ✗

Assessment of

negative SD

impacts

✗ ✔ ✔ ✔ ✗ ✔ ✔ ✔ ✔

Monitoring and

reporting (✔) ✔ ✔ ✔ ✗ ✔ ✔ ✔ ✔

Independent 3rd

party validation

and verification

(✔) ✔ ✔ ✔ ✗ n/a n/a ✗ ✗

Certification ✗ ✔ ✔ ✔ ✔ n/a n/a n/a n/a

Guidelines

Stakeholder

consultation

✗ ✔ ✔ ✔ ✔ ✔ ✗ ✔ ✔


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4.2.2 Analysis of the matrix to identify shortcomings of the CDM SD tool

In this chapter, we analyze the CDM SD tool in comparison to other mechanisms' approaches to sus-

tainability assessment along the 'needs' criteria identified in work package 2. This analysis builds

upon and expands the information that can be gleaned from the matrix.

Indicators for SD co-benefits

As a core component for determining co-benefits of project activities, this criterion is fulfilled by all

analyzed mechanisms that share the goal of co-benefit determination. A number of host country gov-

ernments themselves provide some form of checklist in order to determine possible co-benefits of

CDM projects (Olsen, Fenhann et al. Forthcoming 2015).

The approaches championed by the Multilateral Development Banks (MDBs) differ in this regard, as

they have a different focus. Their safeguard policies are meant to ensure that supported projects 'do

no harm', i.e. do not have a negative effect on Sustainable Development. The UN REDD Programme,

more a framework rather than an explicit tool, provides criteria, but omits specific indicators. It pre-

sumably does so in order to give governments more freedom to independently decide on appropriate

indicator sets.

The CDM SD tool is structured similarly to the checklist approach already applied by host countries.

By providing a taxonomy of Sustainable Development benefits with three dimensions, 12 criteria and

70 indicators as a menu for structuring reporting on expected positive SD impacts of projects, the tool

facilitates a harmonization of information in a structured, consistent and comparable manner that

respects Parties’ prerogative to decide on national priorities. The SD tool is found to meet its objec-

tives and to assist investors to factor in the SD co-benefits in decision-making (UNFCCC 2014).

Quantification

A method of quantifying SD impacts was named highly desirable in particular by project participants.

Quantification would greatly aid to know the scope and significance of SD impacts and is necessary

to monetize the value of co-benefits.

A quantification would also allow to better determine the cost/benefit ratio not only of the GHGs mi-

tigated by a project, but also of its positive (and negative) impacts on Sustainable Development. A

method of quantification could therefore lead to clearer determine and communicate price premiums

for projects with strong positive impacts on sustainability. However, quantifying SD impacts is highly

difficult, as SD impacts of a project will often be diffuse and not readily quantifiable.

Of the analyzed mechanisms, only UNDP's NAMA SD tool attempts to fully quantify SD impacts.

Within the CDM SD tool, SD benefits can be described for the SDC report; quantification is not fore-

seen in any way. The CCB Standards offer a mixture of quantitative and qualitative assessments,

which may be more suitable to adequately depict different forms of SD impacts. All other mechan-

isms fully rely on qualitative data, mostly in prose form.

Assessment of negative SD impacts

Project activities may not only have beneficial effects on Sustainable Development of a host country.

The requirement to assess negative impacts of project is therefore highly helpful. In most of the me-

chanisms negative impacts are assessed with negative scores, and positive impacts are assessed with

positive scores. A requirement to also assess foreseeable negative impacts helps to alleviate them

from the beginning, and ensure that they do no harm to the environment, social and/or economic


79

development. A number of interviewees have indicated that stronger guidance in this regard would

be appreciated.

All mechanisms analyzed make such an assessment mandatory, with the exception of Thailand's

Crown Standard. The Crown Standard itself does not contain provisions to assess negative SD im-

pacts. Instead, it refers to existing national legislation. Indirectly, its provisions can therefore also be

considered mandatory.

The strongest and most detailed requirements for the assessment of negative impacts can be found in

the safeguard requirements of the MDBs, as they are especially geared towards this type of assess-

ment. The Gold Standard, as well as the CCB Standards, also provide for detailed negative impact

assessments, and include safeguard principles in order to ensure that projects do no harm.

By contrast, the CDM SD tool does not contain such provisions. Furthermore, the tool only enables

assessment of positive impacts, as the concept of, co-benefits‘ excludes a mandate to assess negative

impacts. In draft form, the tool did contain safeguard provisions, but its current form does not. This

can be considered a major shortcoming, which severely limits the tool's usefulness as a means of

project assessment.

Monitoring and Reporting

If a project claims Sustainable Development co-benefits, significant credibility is added if adequate

monitoring and reporting requirements are put in place to back up these claims. Similarly, if negative

impacts are identified, monitoring is needed to ensure that these impacts are alleviated.

Nearly all of the mechanisms analyzed require monitoring systems to be put in place. The indepen-

dent certification standards (Gold Standard, CCB Standard, and Social Carbon Methodology) all have

strong obligatory provisions, including dedicated monitoring plans and regular monitoring reports

that are independently verified.

The SD tool instead does not call for any monitoring requirements. The SDC report as a single docu-

ment may be submitted at any time, without any requirements for follow-up monitoring of SD claims

made. DNAs do not systematically monitor SD claims, and some voiced concern in the interviews that

this would put an additional burden on them or the PPs.

However, a process has recently started within the CDM Executive Board at its 82nd meeting in Feb-

ruary 2015, which may strengthen the CDM in this regard. The Board discussed a concept note on

‘Voluntary monitoring of Sustainable Development co-benefits’ (UNFCCC 2015), which may lead to

using the CDM SD tool as a basis for monitoring, validation and verification of SD claims in a stan-

dardized way that supports DNA practices.

Independent third party validation and verification

In order to give credibility to review and evaluation efforts, the use of external auditors can be highly

recommended.

The Gold Standard, the SCM and CCB standards cover this step, which is needed to ensure that a

project did fulfill its requirements, and, in case of certification, can receive the intended certificate.

The MDBs do not prescribe external auditing as a mandatory step but they have internal review pro-

cedures in place, and in some cases require external check-up as well.

Again, the CDM SD tool in its current form does not contain any requirements in this regard. Howev-

er, the same process that may strengthen SD monitoring and reporting within the CDM (UNFCCC

2015) may also include suggestions for the use of independent auditors.


80

Certification

Certificates can add significant value to carbon credits generated by a project with high SD co-

benefits. Certified credits regularly fetch higher prices on the carbon market, in return for the assur-

ance that the project o origin fulfills high standards.

The four certification standards considered in WP1 (three independent, and the Thai Crown Stan-

dard), have this consideration at their core. The CDM SD tool's SDC report could in principle be used

as a type of certificate as well. At the moment, this is not foreseen. It needs to be noted that in order to

add value to claims made in the SDC report, a verification of claimed SD co-benefits would be needed,

if possible by an independent institution.

Guidelines for Stakeholder consultation

At least one country (Cambodia) has requested technical assistance from the UNFCCC Secretariat to

assist with country specific guidance for guidelines for local stakeholder consultations. A process to

consult with stakeholders is a core element to ensure that a given project activity is beneficial to Sus-

tainable Development and does not impact negatively.

By far the most approaches covered in WP1 have included mandatory stakeholder consultation

processes into their project design, albeit with varying strictness. In order to identify stakeholders, all

approaches include structured processes, stakeholder meetings and project reference material in

local languages (for the Crown Standard, this is unknown). Of the certification standards, only the

Gold Standard has established procedures that open the local consultation to globally active stake-

holders/NGOs. The MDBs as well as the UN REDD Programme provide for dedicated policies for the

inclusion of indigenous peoples into the project assessment process.

Another important aspect of stakeholder involvement is the establishment of a grievance mechanism

to address and solve complaints about the project activity by the local stakeholders. With the excep-

tion of the NAMA SD tool, which is completely silent on stakeholder consultation processes, all me-

chanisms include some form of grievance mechanism.

By contrast, the CDM SD tool does not contain any mentioning of stakeholder consultations. This

absence of the issue is puzzling, as there are provisions for stakeholder involvement in the CDM itself.

4.3 Recommendations and feasibility analysis to further develop the CDM SD

tool

Building upon results of the synthesis, this chapter serves to develop recommendations for further

improving the EB's CDM SD tool. We discuss possible ways to improve and enhance the tool, and to

improve the consideration of SD in CDM in general.

This is done on two consecutive levels:

▸ Level one lays out improvements that we regard as amendments to the SD tool, and therefore

relatively easy to install.

▸ Level two recommendations go one step further: They describe more fundamental changes that

would help to transform the voluntary tool into a credible assessment and reporting system.

Each recommendation will be complemented by a short paragraph analyzing the feasibility of the

improvement. This assessment is based on expert judgement, but points to specific references where

applicable.


81

4.3.1 Level 1 Recommendations: Improving the tool

Introducing no-harm safeguards

At the moment, there is no provision to include information on potential negative impacts of CDM

activities in the SD tool.

An introduction of reporting on no-harm safeguards in the voluntary SD tool is considered a first step

in order to arrive at a holistic Sustainable Development assessment of CDM projects / programs.

A common procedure to do a no-harm assessment that could also be applied to the SD tool is the dec-

laration of risk levels of an activity according to a catalogue of general safeguard principles (cp., for

example, Ibenholt 2011, IEG 2010, MDG 2008). These could be further specified by a number of

questions that the project proponents answer to their best informed knowledge. Such general safe-

guard principles may include:

▸ Human rights,

▸ Good labor practice,

▸ Environmental protection,

▸ Anti-corruption,

▸ Land rights,

▸ Other activity-related impacts

As the introduction of such no-harm safeguards was already proposed to be included in the first draft

of the SD tool (UNFCCC 2012b), taking up the original proposal again could be a starting point. The

principles and negative impact options laid out in that document are based upon the UN Global

Compact and the Millennium Development Goals (MDG). This proposal could be revised in order to

accommodate for concerns raised by EB members, who argued against the inclusion of safeguards at

the 68th session of the EB and decided upon the design of the tool, as it stands today.

The set-up of all mechanisms except one covered in WP1 of this research indicates that a mandatory

inclusion of safeguards is feasible (Arens et al. 2014). Moreover, the COP decision 1/CP.16, which

states that human rights must be respected in all climate related actions, provides a mandate and an

entry point for considering a rights-based approach to the CDM (cp, for example, Human Rights and

Climate Change Working Group 2012, Filzmoser, Voigt et al. 2015).

In addition, introducing safeguards also comes with additional benefits, p.ex. project proponents can

use safeguards for their project planning, in order to demonstrate responsibility and increase local

acceptability for the project. Buyers may use the safeguard assessments as part of their due diligence

reporting (Olsen, Fenhann et al. Forthcoming 2015). Guidance on the introduction of no-harm safe-

guards also has the potential to increase the capacities of DNAs towards structured and systematic SD

assessment approaches.

Developing monitoring and reporting guidelines

In its current form, the SD tool solely foresees the notification of assumed SD co-benefits, in a single

report (the so-called SDC report). There is no requirement for following up on the identified co-

benefits over the project lifetime. This means that changes in SD effects over time do not have to be

reflected in the current form of the SDC report.

At its 82nd session, the Board decided to make monitoring and reporting of SD impacts an option. Yet

there are no guidelines for monitoring and reporting which would allow for a standardized, compa-

rable and credible follow-up of the SD benefits claimed in the SDC reports. Such guidance by the


82

Board would assist project developers and CMEs to monitor and report on SD impacts during imple-

mentation.

As a first step, existing guidelines developed by other mechanisms could be taken as blueprints for a

voluntary application in the SD tool. As an example, the Gold Standard, as well as the other certifica-

tion mechanisms, provide detailed guidance on monitoring and reporting of SD co-benefits, tailored

towards the use within the CDM context (cp. Olsen et al 2015, see also Bumpus & Cole 2010, Sterk et

al. 2009).

The Board could therefore adjust them with relative ease to fit the SD tool's specifics, and publish

them as guidance for PPs and CMEs in their voluntary reporting of SD co-benefits in a more conti-

nuous fashion.

To keep the SD tool voluntary and flexible to use, monitoring and reporting of SD co-benefits should

be clearly separated from GHG reduction monitoring requirements, and be included in regularly up-

dated SDC reports.

Setting up modalities and procedures to assist third party validation and verification of SD claims

The SD tool's lack of monitoring and reporting requirements also means that no procedures have

been defined for the validation and verification of SD claims made in SDC reports. Without any vali-

dation or verification by third parties, the reports only have limited credibility to SD claims made

therein. Third party validation and verification also is a prerequisite for SD benefits to be priced in the

carbon market, mainly in the premium segment (Olsen, Fenhann et al. Forthcoming 2015, The Gold

Standard 2014).

In its 82nd session, the Board has begun to strengthen optional monitoring and reporting of SD co-

benefits. This process could be widened to authorize DOEs validate and verify SD claims made in the

SDC reports. DOEs already cover validation and verification of GHG reductions, which puts them in

an ideal position to also cover SD co-benefits.

We propose to clearly separate modalities and procedures concerning SD claims from those for GHG

reductions. While the latter are a base requirement for the functioning of CDM, the former should

account for the SD tool's voluntary nature, and to provide maximum flexibility in their use. However,

if PPs choose to report on SD co-benefits, a validation and verification of their claims by DOEs, fol-

lowing modalities and procedures established by the EB, would greatly enhance the credibility of

SDC reports. This would add considerable value to credits generated by those projects reporting on

SD co-benefits.

Linking enhanced stakeholder requirements to the CDM SD tool

The SD tool in its current form does not contain requirements for stakeholder involvement. However,

stakeholder involvement at global and local levels is seen as an important means to enhance accep-

tance of the project, and to ensure transparency (as stated in Principle 10 of the 1992 Rio Declaration

on Environment and Development). Furthermore, as can be seen in our assessment of the SD provi-

sions of other mechanisms (Arens et al. 2014), it complements other risk-minimizing strategies like

no-harm safeguards and assessments in order to mitigate potential negative impacts of projects, to

increase local acceptability and respect for human rights generally.

Linking enhanced stakeholder consultation requirements to the CDM SD tool would be a necessary

step in order to implement a meaningful SD assessment. This should comprise holding an initial local

stakeholder meeting before the PDD is submitted to UNFCCC. At this meeting, stakeholders should be

addressed in their local language and a non-technical project description should be presented. The

extended SDC reports featuring the ‛do no harm“ section as well as an outline of how to monitor SD


83

benefits and to follow-up on the safeguards (cp. above) could be used as the basis for stakeholder

consultations (cp. Olsen, Fenhann et al. Forthcoming 2015). This should be complemented by a

second stakeholder meeting where the PPs follow-up on the stakeholder’s comments is assessed (see

also Carbon Market Watch 2014, Sterk et al. 2009).

Furthermore, the introduction of a grievance mechanism for CDM projects to address potential nega-

tive impacts of projects/programs would be advisable in order to be prepared for a transparent reso-

lution of conflicts (Filzmoser et al 2015, Schade and Obergassel 2014).

The further development of the CDM’s stakeholder consultation processes has been difficult over the

years. It might therefore be advisable to shift this discussion to the review of the modalities and pro-

cedures of the CDM. As shortcomings are not only caused by vague rules but also by a lack of trans-

parent and clear national practices, direct support to countries with best practice guidance is needed

including strengthening the role of civil society organizations and local communities to be involved

in data collection for monitoring of co-benefits and social safeguards (Dong, Olsen et al. 2015). Pro-

posals for enhanced rules for stakeholder consultations in this context already exist, see, for exam-

ple, the EU submission (EU 2013).

4.3.2 Level 2 Recommendations: Enhancing the CDM SD tool

Introducing UNFCCC certification of SD co-benefits based on the CDM SD tool with enhanced re-

quirements

Independent certification of Sustainable Development benefits serves to ensure that SD impacts are

being addressed within the certified projects, and to generate added value through fulfilling high SD

standards. The Gold Standard for CDM projects is an example of how certification can assist to raise

additional finance for CERs, when SD impacts are documented and verified. (Koakutsu, K., K. Tamu-

ra, et al. 2012, The Gold Standard 2014, Sterk et al. 2009).

Host countries are increasingly showing interest in certification of CERs, with initiatives like the do-

mestic Crown Standard in Thailand (TGO 2014 a+b, cp. also Arens et al 2014). Other countries, such

as Cambodia, Indonesia and the Philippines, have indicated their interest in certifying carbon credits

(Tewari 2012). According to one of the leading DOEs, DNV GL, there is also an interest to develop a

common standard at the global level for quantification of SD development benefits and enable bot-

tom-up development of methodologies (DNV 2013).

A global standard for the certification of SD co-benefits that would raise the value of certified CERs

could be implemented on the UNFCCC level, based on the EB's SD tool. The SDC report in its current

form can already be considered a means to raise the value of a project through documenting SD co-

benefits.

The SD tool could in our view thus be transformed into a template for in-country certification that

could be adapted by host-country DNAs to fit their domestic circumstances. The fact that the SD tool

already provides a comprehensive taxonomy of SD indicators greatly enhances the adaptability of the

tool. If DNAs should lack capacities to adapt it, they may simply use the SD tool’s taxonomy without

alterations; the tool's comprehensiveness would ensure that all effects on sustainability a project

may have are covered.

However, without considerably strengthening the tool and ensuring independent third-party verifica-

tion of SD claims, the added value for a project is limited. Therefore, to ensure the integrity of certifi-

cation, all improvements to the tool as proposed in chapter 4.1 should be met:


84

1. Introduction of no-harm safeguards

2. Development of monitoring and reporting guidelines

3. The use of independent auditors that verify the monitored effects

4. Strengthened stakeholder participation rules and guidelines

By designing the SD tool as a template for certification rather than a certification mechanism in itself,

a number of known political difficulties to international standard-setting (cp. Wehnert et al. 2012)

could be circumvented. The SD tool would serve as a global blueprint that would manifest itself only

on a national level, which would aid domestic acceptability and the respect for local circumstance.

Creating a global standard for the quantification of SD co-benefits

For most policymakers particularly in developing countries, alleviating poverty, securing energy

supply, and reducing environmental pollution or in general Sustainable Development co-benefits

take priority over mitigating greenhouse gases (GHGs). SD co-benefits have the potential to attract

public-private investors to finance mitigation projects. Therefore, the need for methods and data to

quantify SD co-benefits is an emerging trend that will also enable monetization and valuation of the

co-benefits (Santucci et al. 2014). Our review on SD assessment tools shows that none of them, ex-

cept partially in CCB Standards and the NAMA SD tool, provides direct guidance on how to quantify

SD benefits (see matrix in chapter 1.1.1).

Quantification and possibly monetization of SD co-benefits of a project would indicate interactions

between climate change mitigation projects and effects on the local environment, economy, and so-

ciety, which is valuable for stakeholders in developing countries, especially for local governments.

Establishing a value for the SD co-benefits means that the willingness to pay for these achievements

can be identified and additional sources of finance for mitigation can be leveraged.

However, some concerns of host country governments that were identified through the interviews

will have to be addressed within the SD tool: this comprises, for example, the extra costs for data col-

lection and quantification, and the question whether a framework for quantification shall be nation-

ally determined or common standards shall be globally defined; the extent to which quantification of

SD impacts is feasible and desirable and the human- and institutional capacity required from domes-

tic MRV systems.

Therefore, we recommend:

1. To develop a global approval standard for SD co-benefit quantification methods,

2. To give project developers as well as other institutions the opportunity to develop methods for SD

co-benefits quantification compatible with their needs and

3. To task an institution such as the UNFCCC Meth Panel with the approval procedure of these me-

thods.

Some private and civil society entities such as DNV as well as VCS/GS and other organizations are

currently developing standards for the quantification of SD co-benefits (cp. preceding section) and

are interested in developing a global standard. Therefore, in order to harmonize technical specifica-

tions and requirements across countries, a voluntary global standard for quantification of co-benefits

could be developed / recognized to enhance the UNFCCC CDM SD tool.


85

4.3.3 Summary

In short, our recommendations to improve the SD tool can be summarized as follows:

Table 12: Summary of recommendations

Improving the

tool

Introduce no-harm safeguards

This implies assessing possible negative impacts of CDM projects by

establishing “no harm” safeguards as mandatory benchmarks. Such

safeguards could be based, p.ex., on the MDGs and comprise Human

rights, good labor practice, anti corruption issues, and the like.

Develop monitoring and reporting guidelines

Since EB82, monitoring and reporting of SD impacts is optional. Global

guidelines can be made available for voluntary use with the SD tool. We

propose to keep this monitoring separate from GHG reduction monitor-

ing, so as to keep the SD tool voluntary and flexible to use.

Introduce 3rd Party validation and verification of SD claims

Independent validation and verification of SD co-benefits will greatly

enhance the credibility of the SDC reports. Again, keeping 3rd party vali-

dation and verification separate from validation and verification of GHG

reductions will keep the tool voluntary and flexible.

Link enhanced stakeholder requirements to the CDM SD tool

SDC reports could be used as the basis for stakeholder consultations.

The additional introduction of a grievance mechanism for CDM projects

to address potential negative impacts of projects / programs should

complement this measure.

Enhancing the

tool

Introduce UNFCCC certification of SD co-benefits

There is an interest in national certification for SD co-benefits, as can be

seen in the Crown Standard in Thailand. A UNFCCC SD certification

framework could be made available to countries that do not have the

capacity to develop their own standards.

Create a global standard for quantification of SD co-benefits

Establishing a value for the SD co-benefits means that the willingness

to pay for extra benefits can be identified and additional sources of

finance for mitigation can be leveraged. We propose a three-step ap-

proach:

Develop a global approval standard for quantification methodolo-

gies,

Give project developers as well as other institutions the opportunity

to develop methods for SD co-benefits quantification compatible

with their needs, and

Assign an institution such as the 'UNFCCC Meth Panel' for the ap-

proval procedure of the methods.


86

5 Outlook: Towards an internationally harmonized SD assessment

In this report, we have analyzed Sustainable Development requirements of selected Carbon Finance

instruments and multilateral standards and compared them to the provisions of the CDM’s SD tool

(chapter 2). This provides us with indications on what is 'offered as the 'state of the art'.

Furthermore, we have analyzed the literature and experiences with host countries, project propo-

nents and a buyer’s perspective on the usability of the EB’s SD tool (chapter 3). This has given us val-

uable insights as to what is 'needed' in practice for an enhanced assessment of Sustainable Develop-

ment impacts.

Finally, we have drawn these two perspectives together in chapter 3, arriving at recommendations for

an improvement of the CDM SD tool.

This section derives conclusions for the further development of SD assessment considerations in

emerging instruments for greenhouse gas mitigation in the global climate protection context.

5.1 Sustainable Development impact assessment in emerging instruments

Assessing SD requirements in emerging instruments like the New Market Mechanism (NMM), the

Framework for Various Approaches (FVA), and the like has proven difficult. First of all, most of the

schemes are still in the early stages of conceptualization and therefore do not feature any reference to

aspects that are beyond GHG management. Moreover, many of these new schemes are going to oper-

ate above the project-level, i.e. targeting entire economic sectors. As a consequence, it is hard to con-

ceive how to introduce a system with SD criteria linked to individual actions. The only feasible option

in this regard seems to be sectoral crediting with installation level crediting. For all other variants,

the introduction of internationally agreed SD criteria for NMM would come close to an international

agreement on Sustainable Development for all the sectors covered by the NMM (Wehnert et al. 2012).

With regard to the FVA, this picture changes as this scheme is to work as an umbrella for a multitude

of mechanisms, some of which will be project-based. An example would be the Japanese Joint Credit-

ing Mechanism (JCM), which is modelled on the CDM principles. Introducing SD criteria at mechan-

isms-level looks feasible here at first sight. However, in order have a system which is comparable over

the whole framework, the SD criteria would need to be fixed at the highest level, i.e. at FVA gover-

nance level. Yet this would probably lead to a very general SD assessment approach because the me-

chanisms covered by the FVA will be very different in scope, nature and approach.

For the development of an SD assessment framework for NAMAs it is useful to clarify the commonly

used concepts to describe the relation between NAMAs and Sustainable Development. Coming from

sustainability assessment of CDM projects, there is a risk of adopting a climate first approach reflect-

ed in the concept of ‘co-benefits’, where the price of GHG reductions is the driver of CDM mitigation

actions and SD is characterized by weak national and international practices for MRV of the SD co-

benefits (Olsen 2007; Sterk, Rudolph et al. 2009). For NAMAs the priorities are reversed. Developing

countries emphasize the right to development as a key driver of Sustainable Development and NA-

MAs are seen as a means to move away from business-as-usual high-carbon pathways towards low-

carbon pathways. SD objectives are widely recognized as a key driver of NAMAs in developing coun-

tries (Cerqueira, Davis et al. 2012; LEDS_GP 2012; Tilburg, Röser et al. 2012; GIZ 2013) reflecting a

development first approach. In line with this approach more appropriate concepts are Sustainable

Development impacts of NAMAs and sustainability assessment. Co-benefits have a connotation of

being secondary to the actions, which is not the case for NAMAs, where development goals have

priority.

The question of how Sustainable Development impacts are to be integrated into NAMA processes

remains open, as do questions regarding which impacts should be assessed and how they should be


87

measured. Research and best practice experience on how Sustainable Development considerations

have been integrated into mitigation actions through the CDM EB SD tool and other SD standards can

inform development of NAMA SD assessment methods. However, the rigor found in these standards

may or may not be suited to NAMAs, since globally defined and onerous standards may not be in the

interest of implementing countries. In addition, NAMAs are much broader than the project-based

CDM, potentially involving policy and sectoral actions that require different Sustainable Develop-

ment assessment tools.

5.2 Relevance for other mitigation mechanisms

SD assessment experiences by both host country DNAs and CDM project participants indicate that the

tool has a potential to harmonize reporting on SD efforts across mitigation mechanisms such as NA-

MAs, NMM/FVA, REDD+, LCDS and INDCs. It would be useful and a simplification to have a uniform

SD reporting format across countries for all CDM projects and beyond to actions and policies for miti-

gation and development incentivized by other mitigation mechanisms. This is a largely unexplored

issue not yet addressed in the literature. Project developers see a role for the tool to enhance domestic

dialogues on SD but host countries are divided and China and Brazil do not see a role for the tool in

relation to strengthened national dialogues on SD priorities.

Overall, SD tool experience can be relevant to CDM and other mitigation actions in three ways: 1)

Strengthened standards for SD assessment at the international level, 2) Enhanced national standards

for SD assessment based on the SD tool, e.g. by making it mandatory at national level for PPs to use

the tool for issuance of LoAs and by including the SDC report as a basis for local stakeholder consul-

tations, and 3) Market players could seek certification of SD impacts of mitigation actions based on

the tool being further developed in line with general requirements for results-based finance applica-

ble beyond CDM.

Further development of the SD tool could make the tool attractive beyond CDM, to harmonize SD as-

sessment and reporting requirements in other mitigation mechanisms. Given the mandate that go-

vernance of the CDM’s contribution to SD is the prerogative of Parties, challenges to make the tool

useful more widely is to a large extent of a political nature, related to the competition of interests be-

tween host countries, international governance and the role of market players, who wish to set higher

standards than what is currently practiced by DNAs.

5.3 Lessons for future developments in SD assessment

Level 1 and level 2 recommendations introduce a step-by-step approach to increasingly ambitious

and more fundamental changes to the SD tool, which could make it attractive and more widely appli-

cable for SD assessment of mitigation actions beyond CDM to other climate mechanisms at national

and internationally levels such as domestic emissions trading schemes (ETS), New Market Mechan-

isms (NMM), a Framework for Various Approaches (FVA), Nationally Appropriate Mitigation Actions

(NAMAs) and Green Climate Fund (GCF) financing for mitigation actions.

A key starting point for harmonization across mechanisms is the SD tool’s international definition of

SD criteria and indicators that enable a uniform SD assessment report in a transparent, inclusive and

objective manner across projects and countries, while maintaining the prerogative of Parties to define

their national SD priorities.

Framework for sustainability assessment of mitigation actions based on an improved CDM SD tool

Improvements to the voluntary CDM SD tool can be relevant to other mechanisms by promoting the

use of CDM standards in the development of a flexible framework building on the level 1 and level 2

recommendations that countries and market players can adapt to specific country or market needs.

An enhanced CDM SD tool can set robust standards with a view to enable linking and harmonization


88

with emerging national and international market and non-market mitigation mechanisms similar to

the way, the CDM already sets standards for accounting and MRV of GHG reductions (CDM Policy

Dialogue 2012).

An example of a flexible SD framework is the development of an approach to measure the SD impacts

of NAMAs, which builds on the CDM SD taxonomy by adding an institutional dimension to the cur-

rent social, environmental and economic dimensions (see Table 13 below).

Table 13: Flexible SD Framework for NAMAs

Source: Draft final report on Measuring Sustainable Development in NAMAs (Olsen, Bizikova et al.

forthcoming)

The framework is a menu of elements for SD assessment of NAMAs that can inform the development

of specific SD tools. Each of the elements is a step towards a comprehensive SD impact assessment.

Realizing the differences in country and stakeholders’ perspectives, it is not possible to impose a ‘one

size fits all’ standard that includes global, technical specifications for all the elements. Rather, a vo-

luntary UNFCCC SD certification scheme for CDM projects can be made available to countries, that

may choose to develop their own standards guided by UNFCCC criteria and principles, or if countries

do not have capacity to develop their own standards, they can choose to make use of the UNFCCC

CDM SD certification scheme in their approval process.


89

Usability of an enhanced UNFCCC SD tool by host countries and market players

Governance of mitigation actions by developing countries is moving towards the national level with

countries deciding their own rules, procedures and methods for issuance of units of GHG reductions,

including SD co-benefit assessment following the same path. A trend in domestic MRV systems is that

increasingly countries want to measure the SD co-benefits in parallel to GHG reductions, partly due to

international financing agencies requiring that co-benefits and impacts for transformational change

are part of performance measurement frameworks (Cerqueira, Davis et al. 2012; GCF 2014).

The relevance of an enhanced UNFCCC SD tool is to develop standards for a common framework for

sustainability assessment of mitigation actions applicable across countries and levels of activities

ranging from projects and programs to sector-wide approaches for GHG and SD goals based on poli-

cies and actions. However, while project developers and buyers have an interest in standardization

for uniform criteria and requirements across countries, host countries are divided and are often op-

posed to international standards that challenge the principle of national sovereignty as identified in

the interviews.

A national certification approach to mitigation actions can promote a higher standard for SD assess-

ment, internalize the SD benefits into the price of CERs (Koakutsu, Tamura et al. 2012) or other units

of GHG reductions and give an incentive to developers of projects, policies or actions to consider the

SD impacts of their mitigation actions. A few host countries have already developed national schemes

such as the Crown Standard in Thailand and the introduction of scoring of SD indicators in Cambo-

dia, Philippines and Georgia (Tewari 2012), however, national schemes are not widely used. A wider

use also beyond CDM would require an enhanced role of DNAs or other national authorities more

central to development planning to ensure alignment between mitigation actions and national, sec-

toral or sub-sector SD goals.

Harmonized SD assessment for a Paradigm Shift

This year in 2015 three high-level processes are running in parallel to define global and national

goals for the environment, development and climate: the Sustainable Development Goals (SDGs),

originating in the Rio+20 process and merging with the Millennium Development Goals (MDGs) from

the UN Post-2015 Development Agenda, and the New Climate Agreement under the UNFCCC process.

The three processes are related but institutionally separate. They aim to inspire actions and targets

for implementation at national level supported by international institutions.

Common to the three processes is their intention to achieve a paradigm shift towards sustainable and

low-carbon development. However, implementation of global goals for such a paradigm shift re-

quires action at the national level.

This is where a globally defined, but flexible approach to SD assessment can truly make a difference:

global harmonization of SD assessment, comparable across mitigation mechanisms and main-

streamed into development planning frameworks at national level can serve to integrate sustainabili-

ty assessment standards into performance measurements systems such as domestic MRV systems.

Adhering to agreed standards on the other hand ensures that countries are in compliance with inter-

national finance institutions such as the Green Climate Fund.

Sustainable Development benefits of climate instruments are highly relevant for development path-

ways beyond the area of climate change. Mitigation measures can have additional health, social, en-

vironmental, macroeconomic as well as equity aspects. With the prospect of the new 2015 climate

change agreement on the horizon, many developing countries have begun installing and refining

their climate policies. SD benefits in CDM and new market mechanisms actually have the potential to


90

match developing countries’ needs with regard to both Sustainable Development and climate mitiga-

tion measures. Therefore, the prospect of enhanced SD assessments could not be more timely.


91

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96

6 Annex 1: Interview guide

PART 1: Introductions (5 min)

1. Background and practicalities

Thank you for agreeing to this interview (objectives and background for the study are introduced in the letter of invita-

tion)

We would like to record the interview as support to note-taking. Interviews will not be transcribed but are captured in a

summary report based on the notes and, if you allow us, the recorded interview. Will this be acceptable to you?

For further use of the interviews, can we reference you as the source or do you prefer to be anonymous? – Yes / No

2. Interviewee profile:

Name:

Country:

Institutional affiliation:

Position:

Role relating to CDM:

Date and location of interview:

PART 2: Domestic experience with SD assessment of CDM projects (10 min)

What are the DNA SD criteria for approval of CDM projects?

o Are they publicly available? /How did you as a project developer come to know of them?

o How do they relate to other national SD goals?

On what basis are LoAs granted and what is the approval process?

Is there DNA/project developer interest and capacity to follow up on SD assessments/LoAs to monitor and verify that

CDM projects contribute to national SD criteria?

Do you have national requirements or practices additional to the CDM procedures for stakeholder involvement? – for

instance if an EIA is required for a CDM project

Does the DNA/project developer make use of any safeguards against negative impacts? Do you see a need for this?

In your view, is there a need for additional procedures to strengthen host country SD assessment of CDM projects?

PART 3: SD tool specifics (10 min)

What is the general DNA experience - or view - on use of the CDM EB SD Tool?

What is your individual view on the usability of the CDM EB SD Tool? – e.g. at what stage in project development is it

used and can add the most value

Is it regarded as an additional effort to use the CDM SD tool? Or as a simplification to have a reporting format that

supports existing DNA SD criteria?

Do you see any possibilities for expanding use of the tool? – e.g. to follow up the SD declaration with requirements for

monitoring and verificiation that SD impacts are realised


97

What are your views on making the tool mandatory for CDM project developers to use?

What is the DNA interaction with CDM project developers submitting the SDC report?

PART 4: Beyond the tool – national SD assessment and other mitigation actions (5 min)

Do you see a need for quantification and valuation of SD co-benefits?

Do you see any possibilities to enhance domestic dialogues on sustainable development through strengthening SD

assessment of CDM projects and programmes?

Could the CDM SD tool be useful in terms of harmonisation of SD efforts with other mechanisms? - such as REDD+,

NAMAs, NMMs and LCDS?

Do you see an interest in certification of carbon units for their contribution to national sustainable development im-

pacts?

According to Cancun decision 1/CP.16 human rights must be respected in all climate change actions. Do see any op-

portunities for strengthening a HR-based approach to CDM through national sustainability assessment and the CDM EB

SD Tool?

Thank you!


98

7 Annex 2: Overview of literature reviewed

Reference Issues explored Method and data Key findings

State of knowledge about the CDMs contribution to SD

Olsen, K. H. (2007). "The

clean development

mechanism's contribu-

tion to sustainable de-

velopment: a review of

the literature." Climatic

Change 84(1): 59-73.

The paper reviews the

state of knowledge on

how the CDM contrib-

utes to sustainable

development

The literature review

is based on 19 stud-

ies that fall in four

groups; forward-

looking, SD impact

assessment, carbon

forestry and mixed

topics

The main finding of

the review is that left

to the market forces

the CDM does not sig-

nificantly contribute to

SD

Paulsson, E. (2009). "A

review of the CDM litera-

ture: from fine-tuning to

critical scrutiny?" Inter-

national Environmental

Agreements-Politics Law

and Economics 9(1): 63-

80.

This article reviews

the literature on CDM

thematically after the

mechanism‖s two

goals: to reduce GHG

emissions and con-

tribute to sustainable

development in host

countries

The review covers

about 160 articles

and reports on the

CDM, providing a

summary of the

main themes dis-

cussed

A common assess-

ment is that the cur-

rent structure of the

CDM leads to a focus

on cheap emissions

reductions at the ex-

pense of sustainable

development benefits

for the host countries

UNFCCC (2012). Benefits

of the Clean Develop-

ment Mechanism 2012.

Bonn, United Nations

Framework Convention

on Climate Change Se-

cretariat: 102.

Two types of assess-

ment of the contribu-

tion of the CDM to

sustainable develop-

ment are possible on

a project-by-project

basis:

• How a CDM project

contributes to sus-

tainable develop-

ment; and

• How much a CDM

project contributes to


ment?

This study assesses,

how CDM projects

contribute to SD.

The sustainable

development claims

in the PDDs of 3,864

projects registered

and undergoing

registration as at

June 2012 were

tabulated using SD

indicators. A survey

of 392 projects was

conducted to com-

pare PDD state-

ments with actual

SD impacts of pro-

jects being imple-

mented.

The relative reliability

of PDD claims, as veri-

fied by a follow-up

survey, suggests that

the CDM is making a

contribution to sus-

tainable development

in host countries in

addition to the mitiga-

tion of greenhouse

gas (GHG) emissions.

Almost all CDM pro-

jects claim multiple


ment benefits, but the

mix of benefits

claimed varies con-

siderably by project

type.


99

Reference Issues explored Method and data Key findings

State of knowledge about the CDMs contribution to SD

He, J. J., Y. F. Huang, et

al. "Has the Clean Devel-

opment Mechanism as-

sisted sustainable de-

velopment?" Natural

Resources Forum 38(4):

248-260.

This paper aims to

provide evidence

across 58 host coun-

tries on the effective-

ness of CDM in en-

couraging sustainable

development in host

countries.

This paper adopts

the Sustainability-

adjusted Human

Development Index

(SHDI) used in

Pineda (2012) as a

measure of sustain-

able development

and make use of a

sample of 58 host

countries‖ CDM ac-

tivities between

2005 and 2010

This research pro-

duces significant evi-

dence that CDM pro-

ject development can

contribute to sustain-

able development

efforts in a given host

country should all

CERs be realized. The

results lend support to

the effectiveness of

CDM in boosting

global sustainability

Dialogue, C. P. (2012).

Climate Change, Carbon

Markets and the CDM: A

Call to Action. Report of

the High-Level Panel on

the CDM Policy Dialogue.

Luxembourg, UNFCCC.

The Panel recom-

mends 51 actions

across 12 areas to

address the crisis in

international carbon

markets and to make

the CDM fit for the

future

The recommenda-

tions are based on a

wide-ranging re-

search programme

addressing 22 top-

ics across three

main areas: the

impact of the CDM

to date; the govern-

ance and operations

of the CDM; and the

future context in

which the CDM

could operate. It

also organized a

stakeholder consul-

tation programme

with dozens of for-

mal and informal

meetings around

the world.

The Panel finds that it

is not possible to

reach a definitive con-

clusion on the sus-

tainable

development impacts

of the CDM to date,

given the insufficiency

of objective data. The

CDM appears to have

had more positive

impacts than negative

impacts in most

cases. There are also

strong assertions of

negative impacts,

although the lack of

requirements and

guidance for monitor-

ing

and reporting makes it

impossible to assess

the actual sustainable

development effects

with a degree of cer-

tainty.


100

Governance of the CDMs’ contribution to sustainable development – the role of host country

DNAs, market players and global rules

Host country DNA practices for approval of CDM projects

Olsen, K. H. and J. Fen-

hann (2008). "Sustain-

able development bene-

fits of clean development

mechanism projects: A

new methodology for

sustainability assess-

ment based on text

analysis of the project

design documents sub-

mitted for validation."

Energy Policy 36(8):

2819-2830.

The main argument of

the paper is the need

for an international

standard for sustain-

ability assessment—

additional to national

definitions—to

counter weaknesses

in the existing system

of sustainability ap-

proval by designated

national authorities in

host countries

An assessment DNA

practices for ap-

proval of CDM pro-

jects draws on data

available on the

Internet, describing

the operation of 7

selected DNAs in

addition to existing

studies

The most commonly

used approach to the

establishment of SD is

the checklist ap-

proach. However, the

definition of criteria

differs from one coun-

try to the other. No

countries require that

the expected SD bene-

fits— as described in

the PDD—are moni-

tored on an equal ba-

sis with GHG reduc-

tions to verify that

they are ―real and

measurable‖

Tewari, R. (2012). Map-

ping of Criteria set by

DNAs to Assess Sustain-

able Development Bene-

fits of CDM projects CDM

Policy Dialogue. India,

The Energy and Resource

Institute (TERI): 36.

The report provides a

summary of the sus-


criteria used by DNAs

and the common ap-

proaches employed to

provide the Letter of

Approval (LoA) to pro-

ject proponents

The assessment is

based on three main

data sources: a

compilation of

questionnaire re-

sponses from DNAs,

sustainability crite-

ria as de-

fined/provided in

DNA websites and

relevant literature

sources

The current system, in

which countries set

their own sustainable

development defini-

tions and criteria,

should remain - in

order to ensure coun-

try specific indicators

that are aligned with

local socio-economic

conditions and re-

spect national sover-

eignty

Koakutsu, K., K. Tamura,

et al. (2012). Green

Economy and Domestic

Carbon Governance in

Asia. Greening Govern-

ance in Asia-Pacific, Sato

Printing Co. Ltd.: 55-84.

This chapter consid-

ers how domestic car-

bon governance in

Asia can be aligned

with sustainable de-

velopment by explor-

ing the relationship

between green econ-

omy, low carbon de-

velopment and SD

Case studies in

Asian countries that

examine domestic

mitigation policies

in China, India, Ja-

pan and ROK

There are three types

of approaches to pro-

mote SD through the

CDM: assessment,

fund and certification.

The certification ap-

proach surpass the

others, as it has an

original function that

added-value of bene-

fits for SD can be in-

ternalised in the price

of CERs


101




Bumpus, A. G. and J. C.

Cole (2010). "How can

the current CDM deliver


ment?" Wiley Interdisci-

plinary Reviews-Climate

Change 1(4): 541-547.

The key focus to

strengthen SD im-

pacts of the CDM is

the role of CDM gov-

ernance, focusing on

the role of DNAs,

stakeholder involve-

ment and rules for

monitoring and verifi-

cation of SD claims.

Analysis of the role

of procedural rules

for strengthening

SD assessment at

national level in the

case of Brazil

The key argument is

that strengthening SD

impacts of CDM is

about understanding

and regulating power

relations, focusing on

procedural issues

rather than substan-

tive issues such as

measuring SD based

on indicators for PDD

analysis

Buhr, K., P. Thorn, et al.

(2012). "The Clean De-

velopment Mechanism in

China: Institutional Per-

spectives on Govern-

ance." Environmental

Policy and Governance

22(2): 77-89.

We propose that the

CDM literature could

benefit from employ-

ing institutional the-

ory to demonstrate,

how rules and regula-

tions are coloured by

the norms and values

in social contexts,

often in a national

context, which adds

to our reasons for

including the national

dimension of CDM

The research ques-

tion is: How has the

Chinese govern-

ment attempted to

govern the CDM

market, and with

what conse-

quences? The cen-

tral government

remains at the cen-

tre of climate policy

efforts in the coun-

try and this paper

focuses its analyti-

cal attention to the

nation-state.

CDM governance is

influenced by nation-

specific social and

cultural factors. From

this argument it fol-

lows that governance

patterns will not be

the same in every

country. What is seen

as nationally appro-

priate will differ, in

terms of both how the

CDM market should

function and the na-

tional priorities it

should support

Rindefjall, T., E. Lund, et

al. (2011). "Wine, fruit,

and emission reduc-

tions: the CDM as devel-

opment strategy in

Chile." International

Environmental

Agreements-Politics Law

and Economics 11(1): 7-

22.

This paper studies,

how

the host country pre-

rogative to define sus-

tainability within the

CDM plays out in prac-

tice

Case study of Chile.

The focus on ―gov-

ernance from above‖

is complemented in

this paper with a

focus on ―govern-

ance from below‖

and deal with do-

mestic mechanisms

and processes

The ―race to the bot-

tom‖ in terms of sus-


requirements has be-

come a deliberate

choice that mirrors the

emphasis on eco-

nomic development in

Chile‖s overall devel-

opment strategy


102




Ganapati, S. and L. G. Liu

(2009). "Sustainable

development in the

Clean Development

Mechanism: the role of

Designated National

Authority in China and

India." Journal of Envi-

ronmental Planning and

Management 52(1): 43-

60.

The main question for

the paper is: what is

the Designated Na-

tional Authority‖s role

in ensuring sustain-

able development

through the Clean

Development Mecha-

nism?

Case studies of In-

dia and China.

Three aspects of the

DNA‖s role are ex-

amined: the institu-

tional structure, the

policy context and

the CDM project

market

The cases show that

the DNA

can wield consider-

able influence on rais-

ing CDM projects to

achieve broader sus-


goals. Although the

ability of a DNA to

achieve sustainable

development depends

on the country context

UNFCCC (2014). Possible

changes to the modali-

ties and procedures for

the Clean Development

Mechanism. Technical

Paper. Bonn, United Na-

tions Framework Conven-

tion on Climate Change:

42.

Further elaboration of

the role of DNAs re-

garding the following

issues: Clarify the

roles of DNAs, in-

crease transparency,

allow DNAs to validate

CDM activities, han-

dling of complaints or

stakeholder com-

ments, further elabo-

rate the requirements

for the content and

form of LoAs

The analysis focus

on possible

changes to the CDM

modalities and pro-

cedures, including

their implications

based on data in-

cluding submis-

sions from Parties,

recommendations

of the Board, work-

shop reports and

oral interventions

during SBI 39.

No decisions were

made on revised

M&Ps at CMP-10. The

SBI negotiations on

possible changes to

M&Ps for the CDM will

continue at the June

2015 session in Bonn

with an aim to con-

clude by CMP-11 in

Paris

The role of market players and global rules

Torvanger, A., M. K.

Shrivastava, et al.

(2013). "A two-track

CDM: improved incen-

tives for sustainable

development and offset

production." Climate

Policy 13(4): 471-489.

This article examines

how

incentives to enhance


ment and offset pro-

duction performance

in the CDM can be

improved assuming

that a reformed CDM

will be part of a new

climate agreement

from 2020

A review of the lit-

erature is presented

and proposals to

reform the CDM and

strengthen offset

production and SD

with a view to their

political feasibility

are discussed

The primary require-

ment for implement-

ing an SD track is a

common, internation-

ally devised, defini-

tion of SD and its cri-

teria


103

The role of market players and global rules

Parnphumeesup, P. and

S. A. Kerr (2011). "Clas-

sifying carbon credit

buyers according to their

attitudes towards and

involvement in CDM sus-

tainability labels." En-

ergy Policy 39(10): 6271-

6279.

How buyers have dif-

ferent preferences for

SD benefits and label-

ling including willing-

ness to pay a pre-

mium price. The Gold

Standard label (GS) is

used as the represen-

tative of CDM sustain-

ability labels

The study uses clus-

ter analysis to clas-

sify the carbon mar-

ket according to

buyers‖ attitudes

towards involve-

ment in the GS. The

data is based on

117 responses from

an online survey of

primary CER buyers

Evidence suggests

that host countries are

failing to ensure SD

benefits of CDM pro-

jects. It follows that

there is a need for

CDM sustainability

labels to guarantee SD

benefits beyond

minimal requirements

of host countries

Drupp, M. A. (2010).

"Does the Gold Standard

label hold its promise in

delivering higher Sus-

tainable Development

benefits? A multi-criteria

comparison of CDM pro-

jects." Energy Policy

39(3): 1213-1227.

In order to determine

whether Gold Stan-

dard projects can be

associated with

higher local SD bene-

fits.

The paper evaluates

the potential bene-

fits of 48 CDM pro-

jects using a multi-

criteria method and

building on existing

work

Labelled CDM activi-

ties are found to

slightly outperform

comparable projects.

This study finds that

above all the reliance

on renewable energy

projects is responsible

for the higher poten-

tial local SD benefits

of the GS in compari-

son to unlabelled

CDM projects

Schade, J. and W. Ober-

gassel (2014). "Human

rights and the Clean De-

velopment Mechanism."

Cambridge Review of

International Affairs

27(4): 717-735.

This article analyses

the Kyoto Protocol‖s

Clean Development

Mechanism (CDM)

from a human rights

perspective.

The article dis-

cusses two CDM

projects, the case of

Bajo Agua´n in Hon-

duras and the case

of Olkaria in Kenya.

UNFCCC could and

should require all pro-

jects to undergo man-

datory safeguards

based on a human

rights impact assess-

ment (HRIA). Projects

with negative impacts

should be ineligible

for registration


104

Evaluation of the EB’s SD tool

UNFCCC (2014). Informa-

tion note. Evaluation of

the use of the voluntary

online sustainable de-

velopment co-benefits

tool. Version 01.0. Bonn,

UNFCCC Secretariat: 27.

The evaluation aims to

assess whether the

SD tool, through its

use, meets its pur-

pose and achieves its

expected impacts.

Issues evaluated are;

awareness among

users, clarity of the

tool, usefulness,

needs and expecta-

tions of users

Data include a

stakeholder survey

to 4,626 stake-

holders with 137

responses (2.9%)

on access and use

of the tool among

project proponents,

DNAs and investors.

Analysis of 13 SDC

reports with regard

to usefulness of the

content

The evaluation con-

cludes that the SD tool

meets the objective of

the CMP as a voluntary

measure to highlight

the co-benefits

brought about by CDM

PAs and PoAs, whilst

also maintaining the

prerogative of Parties

to define their sus-


criteria